Wow, what a set of options: live, die or quit? It may sound extreme, but this handy phrase is actually a useful way to illustrate that no matter what happens, hybrid long-term care insurance has you covered. Those three options cover every possible scenario in relation to you and your insurance.
- Live: you live for some number of years, at some point needing care that is covered by your policy. The policy pays the promised long-term care benefit, and you are taken care of.
- Die: you live for some number of years and die without ever using the long-term care coverage. The policy pays the promised death benefit to your beneficiaries tax-free.
- Quit: you have the policy for some number of years but decide at some point you don’t want it anymore. You can stop paying the premium and also get some of your money back.
Scenario 1 is what most people think of when they think about long-term care insurance. Traditional (non-hybrid) long-term care insurance also pays out in this case but will not provide a benefit in scenarios 2 or 3. Traditional insurance is more like auto or home insurance, where you pay an amount every month to the insurance company regardless of if you ever use the coverage. Hybrid insurance was created so that you never feel like you spent money to get nothing. If you need your policy for long-term care, you will get the most money out overall and you will also be very happy to have the coverage.
With hybrid insurance, scenario 2 will pay out as life insurance if you don’t need any care, but also if you use some of the care benefits without depleting all the available money. If, for example, you only need 6 months of care, but your policy covers 24 months, your beneficiaries will still see a substantial benefit paid out in the form of life insurance. This allows you to protect yourself and your heirs with the same money.
While we don’t recommend quitting a policy if it leaves you with no coverage, if you find yourself in a real money crunch or want to exchange your coverage, you aren’t stuck with a plan you can’t afford or don’t want. The amount of money you can expect to get back in scenario 3 will vary based on your specific policy, but it is very rare for anyone to choose this option. This type of insurance is purchased for a reason, and it performs very well.
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