Long-term health care has become a big issue for Americans approaching retirement age, according to a LIMRA study. The study suggests that most Americans will be better off adopting a hybrid life insurance policy that includes long-term care. Many people, however, assume long-term care is expensive, so they don't pursue it. Here's what you should know about various life insurance options that provide long-term care.
Here are five types of hybrid insurance policies:
A linked benefit life insurance policy is the best version of a hybrid life insurance policy that provides long-term care. Compared with the monthly premium you pay, the value of the benefits will be worth five times more. That means someone who's still a decade away from retirement and who has contributed $100,000 in premiums to a hybrid plan has access to over $500,000 in benefits.
The American Association for Long-Term Care Insurance has reported that 84 percent of long-term care coverage in 2019 was linked-benefit life insurance.
Some life insurance plans give you the option of buying a long-term care rider with your basic life insurance plan. You must make this decision at the time of purchasing your basic plan.
While long-term care benefits reduce your death benefit amount, they can pay the actual costs of long-term care regardless of these costs. It's still typical for most long-term care plans to provide up to a $20,000 death benefit once all the long-term care coverage is used up.
With a chronic or critical illness rider added to your policy, it's possible to take money from your death benefit to pay for long-term care. This coverage has its limits compared with signing up for an actual long-term care policy.
The two main advantages of a hybrid life insurance policy that combines short-term and long-term needs are consistency and flexibility. You are guaranteed to lock in a premium at a specific price, and you can either make monthly or annual lump sum payments.
Another advantage to a hybrid life insurance policy is that it can pay a family member who takes on the role of a caregiver. This option usually doesn't exist with traditional long-term care policies.
Hybrid policies don't work for everyone, as some individuals may not view them as cost-efficient for their needs. You likely will not get the best coverage for what you pay. A dedicated long-term care policy usually gives you better coverage for the money.
Another disadvantage to a hybrid life insurance policy is that it may involve long waiting periods. They typically have a waiting period of 90 days before you can access benefits. On the other hand, longer waiting periods can reduce the monthly premium.
Individuals who need stand-alone long-term care are typically in their early 50s, while older people gravitate more toward a hybrid policy. Certain carriers of hybrid life insurance offer plans for seniors as old as 85, but at a higher cost than what a 65-year-old pays.
Getting a hybrid life insurance policy can help pay for long-term healthcare, as long as it's not your primary concern. Otherwise, a stand-alone long-term care plan might work better. Contact us here at Long Term Care Advisors for more information on securing a hybrid life insurance policy.
