Long-Term-Care Insurance Is Now an Estate-Planning Tool

"Hybrid" policies that combine long-term-care coverage with potential life-insurance benefits are transforming the long-term-care segment of the U.S. insurance industry, reports the Wall Street Journal . Limra estimates there were 260,000 purchasers of hybrid policies in 2017, versus 66,000 traditional long-term-care policies. Sellers of long-term-care policies originally targeted them to the U.S. middle class, arguing they would save ordinary families from depleting their savings, depending on children, or enrolling in the federal-state Medicaid program for the impoverished. These policies lost popularity after many insurers secured approval from state regulators for steep rate hikes. Today, many insurers are finding these policies most popular among the affluent, who are mainly buying the contracts to protect large estates. The federal government forecasts that 25 percent of Americans turning 65 between 2015 and 2019 will require up to two years of long-term care; 12 percent will need two to five years, and 14 percent will need more than five years. Aides and caregivers who provide round-the-clock care cost $131,400 a year, while private rooms in nursing communities surpass $100,000 in many places. Hybrids can be even more costly than traditional standalone products because they usually include extra features, such as a guarantee that premium rates will not increase. Hybrids also have a "return of premium" feature that allows buyers to recoup much of their money if they want out of the transaction, albeit with no interest.