As we age, our care needs increase. And while we’ve worked all our lives, it is now time to provide for our golden years free from worry. Unfortunately, our long-term care needs may grow in the future, perhaps requiring the financial resources to afford:
- Several years in a nursing home
- Living in an assisted living facility
- Having home care provided by a healthcare professional
Medicare for individuals over 65 may not be enough. As you may know, Medicare does not ordinarily pay for custodial care, such as bathing and toileting. Private health insurance also has exclusions for many long-term care options.
Because Medicare and private health insurance do not seem to cover enough, many individuals have added hybrid long-term care to their portfolio because it covers custodial care and more.
And for those who need help, an independent insurance agent can guide you through the process of which hybrid insurance policy best fits your long-term planning.
How Does Hybrid Insurance Work?
Hybrid insurance gets its name from the fact that it combines the best aspects of traditional long-term care insurance with the benefits of a life insurance policy. Hybrid coverage works two ways:
- If the insured person needs long-term care, the policy will pay benefits toward those expenses.
- If the policy is unused, it pays a death benefit to your beneficiaries that is equal to or close to the premium that you paid.
There are two ways to pay for the premium for a hybrid long-term care insurance policy:
- By paying a one-time lump sum premium up front
- By paying a monthly/yearly premium over a number of years
It needs to be mentioned again that most healthcare policies don’t cover long-term care needs. This includes such services as nursing home stays, assisted living, home renovations to accommodate aging individuals, and home visits by healthcare professionals.
For these reasons and more, individuals need to consider the likelihood that their family can provide caregiving or have the financial resources to provide the best care later in life.
Even setting aside significant savings or investments may not be enough to cover long-term care expenses and may drain funds more quickly than you realize.
What Does Hybrid Long-Term Care Insurance Cover?
The following are some of coverages with a hybrid long-term care insurance policy:
- Assisted living stays
- Nursing home residency
- Home care visits by healthcare professionals
- Adult day care
- Hospice care
- Home modifications to accommodate disabilities
Similar to a traditional LTC policies, the benefits are paid in an amount chosen when the policy is purchased (expressed as an amount per day, month, or year).
Of course, the financial aspects of hybrid coverage help minimize unexpected expenses while providing a death benefit to a beneficiary equal to or close to the premiums paid on the policy.
Benefits of Hybrid LTC Insurance
- Quality healthcare: One of the primary benefits of LTC insurance is that it enables individuals to gain access to quality healthcare that Medicaid does not.
- Better than traditional LTC insurance: While many hybrid companies offer lump-sum payments, some insurers no longer offer payment in full with traditional plans.
- Better quality of life: Owning long-term care insurance, like all other insurance coverages, offers peace of mind and reduces the stress that comes with later-life planning for both policyholders and family members.
- Asset protection: Considering that the annual cost of long-term care may exceed $100,000 for an individual, the insurance coverage can significantly reduce unexpected long-term care expenses. Because the potential long-term care benefits paid out could significantly exceed the premium equivalent to an investment account earmarked for future long-term care needs, hybrid insurance is a wise financial move to maximize your hard-earned money for the future.
- Adjusting for Inflation: Premiums can be locked in with the purchase of a policy with a lump-sum payment. Considering that inflation hovers around 2% per year, this can lead to significant savings in the future.
- Tax benefits: Got permanent life insurance? Hybrid long-term care insurance policies enable those who have permanent life insurance policies to roll over coverage, taking advantage of a “1035 exchange,” which eliminates tax liability for transferring assets. This gives individuals financial leverage, especially if it no longer makes sense in their long-term financial plans. Even better, taxes can be avoided on any gains from the sale of the life insurance policy, which can potentially save thousands of dollars in taxes.
- Death benefit: Upon passing away, your premium is protected and redirected to your beneficiaries if you don’t use your policy for extensive long-term care.
Independent insurance agents can explain more benefits of hybrid long-term care insurance, based on your unique needs. You may want to know which facilities in your area are covered in a particular insurer’s fine print.
Does Hybrid Long-Term Care Insurance Vary State to State?
You may be wondering if coverage varies from state to state. The answer is yes. This is due to the cost of living and access to quality facilities in your area. Taking out a hybrid long-term care insurance policy in Hawaii is significantly higher than in Alabama.
Due to the increased risk for insurers and expenditures associated with long-term healthcare, LTC policies are typically higher than other policies. According to the American Association for Long-Term Care Insurance (AALTC):
- A single 55-year-old male could expect to pay $1,870 annually for a plan with an initial benefit of $150 per day for up to three years.
- A single 55-year-old female would pay $2,965 annually for similar coverage.
- For a 60-year-old couple, the average annual premium is almost $3,500.
Of course, some states have ways to make long-term care insurance more affordable. California, Connecticut, Indiana, and New York are states that have Partnership for Long-Term Care programs, which make buying long-term care insurance a better decision for asset protection and healthcare.
It’s important to realize that the sooner you take out a hybrid LTC policy, the cheaper it is. The reason is obvious. As we age, it becomes more likely that we will need long-term care. Insurers bear the risk, often including an “exclusion period” where policyholders must pay into a system before receiving benefits.
Considering that uninsured individuals would pay out-of-pocket for these long-term costs, hybrid coverage is nearly equivalent to digging into your savings--without the benefits that come with coverage.
Now that you’re aware of how a hybrid long-term care insurance policy works, contact an independent insurance agent to help you pick the best fit.
These insurance agents are experts at taking into account your unique situation and selecting the most comprehensive coverage that provides the greatest benefits, so you can enjoy the later years of your life.