The insurance we buy is supposed to be a money-in, money-out kind of deal. Provided that what you are insuring against actually happens. You only see your car insurance premiums returned to you in the form of repairs if you get into an accident. And you only see house insurance money come back if your home is damaged by weather or misfortune.
But what about long-term care insurance?
Old age is a risk we all take eventually. While everyone looks forward to the freedom of retirement, older people are also more susceptible to illness and injury in a way that simply must be planned for. Long-term care (LTC) insurance is a way to ensure that you will be taken care of even if your day-to-day finances aren't prepared for the expense of hospital or in-home care.
But like any kind of insurance, you only see a benefit from all those premium payments if you actually need care before the end.
The fact of the matter is that not all seniors wind up needing long-term care, but they should all plan for it. There is an average 50/50 chance that you will find yourself ill or enfeebled in your final years, needing help to dress, eat, and navigate chairs.
However, there's also a 50% chance that you won't need long-term care before your last days. And that's not great odds when you're talking about investing $100,000 or more into a long-term care insurance policy.
Many people object to the idea of pouring their retirement funds into long-term care insurance when they may not need the benefits at all.
Especially with the established trend of premiums that can skyrocket at any time to remain covered. While it is important to have a back-up financial plan in case you need long-term care in the future, it's not uncommon to see this as an unfair deal.
In response to the increasing cost and unreasonable gamble of traditional long-term care insurance, several different hybrid variations have appeared offering retirees and savvy retirement planners a better set of options.
The best among the offerings is a hybridization between LTC insurance and a life insurance policy.
In reality, hybrid long-term care insurance actually starts as life insurance. When you take out a universal or whole life policy (but not a term policy), your insurance provider may give you the option to add a long-term care 'rider'. What this means is that in addition to offering a death benefit for heirs, your life insurance rules change if you ever happen to need long-term care.
The funds from your entire life insurance policy become available in monthly payments to cover your long-term care needs. And anything left over will still be paid forward as a death benefit to your heirs.
The best part about this arrangement is that you can have your cake and eat it too. You get all the benefits of a life insurance policy along with peace of mind about your future medical needs. A hybrid policy is more than just money-in, money-out.
If you pay $100,000 in premiums for a $300,000 life insurance policy with a long-term care rider, that extra $200,000 applies to both benefits.
This means that unlike insurance premiums which disappear completely if you don't need the insurance benefit, you can guarantee that you will see your money again (with interest) one way or another.
During the course of your retirement, especially after you have completed the preset payment period, you'll be sitting pretty enjoying the assurance of long-term care coverage if you need it and a well-built life insurance policy for your offspring if your life ends while you are still physically independent.
In the classic analogy, you can 'have your cake' of medical financial security and a good life insurance policy while enjoying the healthy, independent years of retirement. Free of worries about future illnesses or inheritance for your offspring.
But, of course, the true value of hybrid long-term care insurance is that you are fully covered in a friendly and easy to understand way in case you do wind up needing long-term care.
Unlike traditional long-term care insurance where premiums can go up, sometimes for no reason, hybrid policies are usually built with an established amount that you will pay in total and an amount of time to pay that in.
Once your payments are complete, the policy is in place to potentially benefit you for the rest of your life. If, in time, you eventually cannot complete two of the six "activities of daily living", you will qualify for the long-term care benefits to activate.
And instead of having to submit medical costs for coverage, a hybrid policy pays out more like an annuity. You will receive a pre-determined percentage of your total policy amount each month for as long as you need care.
But wait, it gets better. Also unlike a standard insurance policy, the entire policy amount is available to you one way or another. Even if you do need long-term care benefits from your policy, you only use what you use. Anything left over in the policy after death is not 'lost' to the insurance company.
Because it was built as a life-insurance policy first, the remaining balance of both premiums and total policy will be passed on as a death benefit to your heirs.
Do you want to be covered in case of long-term care expenses without seeing unused policy funds disappear into thin air? If so, then a hybrid long-term care insurance policy is the ideal solution. With both the assurance of long-term care coverage and the ability to pass on your policy balance to your offspring, you can't lose.
There has never been a better insurance arrangement to both have your cake and eat it, too. For more information about putting together a hybrid policy that works best for you, contact us today!
