The hybrids in insurance policies, just like those with four wheels on the road, are starting to carve out more market share.
These particular ones are hybrid life insurance policies that contain long term care benefits. As more Americans are living longer and requiring long-term care, individuals and families are taking steps to protect themselves from a long-term-care wipeout.
As the concept’s popularity grows, insurance companies are pumping out new products designed to at least appear to be more affordable, says the American Association for Long-Term Care Insurance.
“The guarantee that you’ll use the coverage is an attractive proposition,” said the organization’s director, Jesse Slome. “But your future payouts, the policy guarantee provisions and even the qualification processes can vary widely, something few consumers are aware of.”
The traditional hybrid combines the standard policy features, such as death benefits, with long-term care insurance. But until recently, these had primary been sold with substantial upfront premium in the range of $75,000 to $100,000 and sometimes more, Slome said.
"Insurance companies are introducing lower-cost options that permit annual or multiple payments. We expect sales of combination long-term care products to grow over the next five years as more life insurance companies add a long-term care benefit option to new or existing policies," he said.
But the unprepared may find themselves paying much more over time for such coverage than they might have paid for the lump-sum package. This is where consumers have to do some education, Slome advised. Attractive features such as premium paybacks, found in some products, may vary widely from policy to policy. To illustrate the range of products now on the market, Slome offered a comparison of two hybrid policies offered by unnamed companies.
“Our analysis found that one combination policy will pay a maximum monthly long term care benefit of $10,846 at age 85 while another will only pay $5,731, some 47 percent less,” Slome reports. “If you die at age 85, the first policy pays a death benefit of $128,057 while the second pays 17 percent more ($150,374). If you are about to pay $100,000, it certainly is worth doing some comparison shopping.”
Further, some carriers have age limits on who they’ll insure, or other standards that may be difficult to meet.
“There are still health standards to meet,” Slome said. “A phone call typically suffices with one company while another requires para-med exams plus contact with your doctors. Ask what you can expect before starting the application process.”