A. In our last blogpost, we discussed why the need for Hybrid life insurance. The advantages of hybrid policies are clear:
- You will get tax-free reimbursements for your qualified LTC expenses. This often allows you to choose where you receive care, rather than choosing the least expensive option by default.
- If you never need long-term care, the beneficiary receives the full death benefit. If you only used a portion of your available funds for LTC, the beneficiary gets the rest income-tax free.
- Because this is a universal life policy, the premiums will never increase if you don’t take out loans or withdrawals. Similarly, there is likely no deductible or waiting period.
- Some carriers may also offer full or partial return-of-premium. This provides additional peace of mind for those who feel strongly that they won’t use their coverage.
Two Types of LTC Payments
There are two types of LTC benefits payments -
a) The policy is structured to reimburse the care providers, the payment from the insurer will be tax free.
b) If the policy uses an indemnity model (in which insurance payments are a set amount), such policies typically pay a full daily or monthly benefits amount directly to the policyholder, if specified conditions are met, the benefits received from an indemnity policy can be untaxed up to the larger of actual outlays for qualified LTC or a per diem limit ($360 a day in 2017).