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New Types of Life Insurance May Be Just What the Doctor Ordered

Hybrid insurance policyThe concept of leveraging your assets and maximizing your estate with life insurance is a common strategy that has been used by many retirees for decades.

If you do this the right way, the purchase of one of the new forms of ‘hybrid life insurance’ can be a great estate planning tool to own within a portfolio of investments. This strategy is so named because with a hybrid life insurance policy the insured doesn’t have to die to use the policy’s death benefit. The insured’s death benefit is calculated by the amount of the one-time deposit, age, gender, and health. In some instances, the single deposit can be multiplied by two or more when determining the policy’s guaranteed death benefit. Therefore, a non-smoking female in average health who contributes $100,000, could see an immediate $200,000 tax-free death benefit. That death benefit can be given to the heirs of her estate without going through probate, as the assigned beneficiaries to the policy. That lets the insured transfer her wealth tax-free and up the amount her beneficiaries will inherit. Insurance companies that write this type of policy may give you an option to accelerate the policy’s death benefit to use for chronic illness and long-term care expenses.

If an individual has bank savings accounts, CDs, money market accounts, brokerage accounts, and even annuities and is keen on the idea of being able to always have access to their money, they should know that some hybrid policies guarantee a 100% return of premium. Other policies allow withdrawals of the policy’s cash value.

Many hybrid policies have growth based on either fixed rates of interest or an indexed rate of interest. This can be much better than a savings account, CD, or an annuity. These added benefits make hybrid life insurance an ideal alternative to depositing cash in the bank.

Some folks over age 65 have the common misconception that the required underwriting process is burdensome and requires perfect health in order for them to qualify. That’s not so in this case because simplified underwriting makes getting qualified quite easy. There’s no medical exam or blood test required. Advanced underwriting and technology that’s been adopted by insurance carriers expedites the approval process. It requires just a few medical questions and a short phone interview.

Hybrid life insurance can be a worthwhile estate planning tool with tax benefits and favorable guarantees.  However, it does have its pluses and minuses.  You should, therefore, work with a competent estate planning attorney with the knowledge and experience to help guide you with this estate planning tool.

Reference: Digital Journal (November 22, 2016) “New Hybrid Wealth Transfer Concept Gaining Consumer Acceptance”

 

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