We all know life is uncertain, and that uncertainty can come at a cost. How long will you be in good health? If you need assistance, how will you pay for it? People often begin to consider these questions as they approach retirement, but accidents or chronic illnesses can happen to anyone at any age.
Long-Term Care (LTC) Insurance has been the traditional option for some time, but it may not be the best investment for some people. Many are turning to a new type of policy: whole life insurance that you can draw from to fund long-term care expenses.
Long-term Care (LTC) Offsets Unpredictable Costs
According to the U.S. Department of Health and Human Services, 70 percent of people over the age of 65 will need long-term care at some point in their lives. Paid out of pocket, the annual costs for nursing homes, assisted living, or in-home care total $140,000 on average. These high costs combined with the unpredictability of how long you may need care create a situation that can be particularly difficult to plan for.
Traditional, Standalone LTC Policies in Decline
Traditional LTC insurance has been a simple arrangement. Policy holders pay an annual premium in return for a specific amount of coverage to help finance care if they ever need long-term help with day-to-day activities or extensive healthcare.
According to the AARP, typical terms for today’s traditional LTC policies include a daily benefit of $160 for care, a waiting period of three months before benefits kick in, and a maximum of three years of coverage. With traditional LTC policies, there are two risks policyholders must consider: the policy may not cover the length of time that you require care, or you may never need it and will never get your money back.
Hybrid Life Insurance Policies Fill the Void
Hybrid policies, or combination policies as they’re often referred to, functionally serve as whole life insurance while also allowing policyholders to withdraw any funds needed for long-term care. Unlike traditional LTC policies, these new hybrid policies will also return money to your heirs in the event you don’t need long-term care or don’t max out your benefits.
In other words, a hybrid policies come with less risk and a planned potential for reward for policyholders. They also carry no risk of a rate hike (as is common with traditional LTC policies) because premiums are locked in up front.
While hybrid policies may seem complex and tend to cost more than traditional policies, they have been growing in popularity due to these attractive features as compared to traditional LTC insurance. Consumers appreciate that a hybrid policy can provide one solution to many financial concerns. Researchers from LIMRA noted six out of 10 consumers would consider these combination products. In 2007, 15,000 life-combination product policies were sold; 10 years later, there were more than 260,000 of these policies sold in the U.S.
Understanding the options that are best can be overwhelming, and there are many options available for consumers. If you would like more information on which policy type would be best-suited for you, please contact us. We can help simplify the details and guide you through various options to help you come up with a personalized plan that is right for you.