Planning matters

Hybrid or Traditional? Your Perfect Long Term Care Product

Long term care is something most of us will need as we grow older. We might develop chronic diseases, mobility issues, Alzheimer’s or other conditions that prevent us from fully caring for ourselves. Studies show 52% of adults reaching age 65 today will require long-term assistance with daily activities such as eating, dressing, and bathing during their senior years.

This type of care is extremely expensive, and for many Americans, downright unaffordable. Annual costs range from a low of $33,000 for in-home care to a high of $100,000 for nursing home care. 

“The out-of-pocket costs of assistance can be catastrophic, and few people have the necessary resources to meet this need,” concluded the report of a nonprofit working group called the Long Term Care Financing Collaborative.  

Private insurance can help cover the cost of care, but traditional “use it or lose it” long term care coverage can be expensive. The average premium today is $2,050 a year for a 55-year-old man and $2,700 for a woman of the same age. That is if you can find a policy.

Many insurers are no longer offering traditional long-term care policies – monthly or annual premium policies which offer similar care benefits as a hybrid policy, but if you never use your benefits you don’t recoup the premiums you pay in. Traditional policies are much like auto or homeowners insurance where you pay your premiums hoping you don’t need to file a claim. As a result, we have seen a significant rise in sales of hybrid policies which combine a life or annuity policy with a long-term care benefits rider.

Today, more than 40 insurance companies are selling products with a long-term care component. Quite a contrast with the 2-3 companies still selling traditional policies! There’s definitely a shift towards hybrids, as they represented eighty-five percent of the long-term care policies sold last year.

Long term care hybrid products can be very flexible in meeting the need for some form of long term care coverage. In retirement, two big risks clients face are early death of a spouse and catastrophic health or long term care expenses. Hybrid life insurance coverage provides a death benefit if one spouse dies, or monthly long term care benefits for each spouse when using the policy rider. There are a variety of premium payment options, coverage for one for both spouses, and qualified funds (IRA) can also be used as a premium.

Demand for hybrid products is not expected to slow down anytime soon, analysts say. A recent survey of retirees by Lincoln Financial Group revealed that 57% listed future health and long term care expenses as their greatest retirement concern. That statistic far outdistanced the 37% who listed “outliving their savings” as their greatest concern.

If you have a traditional long-term care policy in place, wonderful! However, if you haven’t yet considered the benefits of how long term care product can help, let’s chat. Chances are there is a perfect product to meet your need.


Bipartisan Policy Center

Written By Jeri Boston