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Ask Bob: Which Hybrid Long-Term Care Insurance Policy is Best for Me?

How does one decide whether to purchase a hybrid long-term care insurance policy with an annuity rider or a life insurance rider?

Question

How do I go about deciding which is best for me – the hybrid long-term care insurance policy with an annuity rider versus one with a life insurance rider?

Answer

The basic answer is it depends on the client, said Carroll Golden, the executive director of the National Association of Insurance and Financial Advisors and the author of How Not to Tear Your Family Apart.

“In a sense, an annuity is like reverse life insurance,” she wrote in her book. “Instead of insuring against death, annuities are designed to protect against ‘longevity risk,’ the risk that you will outlive your income and savings… this important option for covering extended and long-term care has some real advantages, the least of with is a potential tax benefit.”

“On the other hand,” she wrote, “there are the annuity expenses and fees, involving mortality and expense (M & E) fees and administrative fees.”

Another consideration is this: There is much less "underwriting" with annuities compared to life insurance. Plus, the client must consider whether they have a sufficient sum to pay for the annuity.

As for life insurance, Golden said there are a couple of different approaches. If a client has adequate life insurance, then a policy that diminishes the death benefit may work. If they want to retain the life insurance, then a policy that has an extension of benefits, which may be three or four times the death benefit, would be a better fit.

As you can see, said Golden, “It depends on the client is really the correct answer.”

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Email Robert.Powell@maven.io.


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Question

How do I go about deciding which is best for me – the hybrid long-term care insurance policy with an annuity rider versus one with a life insurance rider?

Answer

The basic answer is it depends on the client, said Carroll Golden, the executive director of the National Association of Insurance and Financial Advisors and the author of How Not to Tear Your Family Apart.

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