People today are keenly aware of the possibility that they may one day require long-term care. However, many individuals do not have a plan in place to finance this care should it become a reality.
What is Long-Term Care?
Long-term care involves a collection of services and supports designed to meet an individual’s personal care needs. When making plans for long-term care, it’s important to remember that it is not covered by Medicare and may involve more than just medical assistance. There is assistance with personal tasks, also called activities of daily living (ADLS), which may include dressing, bathing, eating, and more. Other supports include everyday tasks, or instrumental activities of daily living (IADLS), which include managing money, housework, caring for pets, and other functions. [i]
Who Is Long-Term Care Meant For?
According to LongTermCare.gov, someone turning 65 today has almost a 70 percent chance of needing long-term care services and supports in their remaining years. [ii]
Why Are People Hesitant To Consider Long-Term Care Insurance?
Part of the reason is that people are concerned about paying costly premiums for something they may not need. Traditional long-term care insurance is considered a “use it or lose it” policy, similar to homeowner’s insurance. This means that if you do not need it in your lifetime, you do not get any benefit from paying years of premiums. Premiums are paid each year, continuously, and carriers do have the ability to raise premiums on existing policy holders.
The reality is that long-term care is not cheap. According to AARP, the average lifetime cost of care is $172,000. [iii] But is there an alternative?
Benefits Of Hybrid Insurance
One alternative to traditional long-term care insurance is the hybrid long-term policy. A hybrid policy is a linked benefit insurance policy that links life insurance with a long-term care policy. Premiums are typically paid as a lump sum or, in some cases, can be paid over a certain number of years. But the carrier cannot increase the premium once the contract is in place. This type of product allows you to have long-term care coverage if you may need it down the road; however, if you do not use it, a death benefit gets paid when the insured person passes away.
A Comparison Of Hybrid Long-Term Care Insurance Vs. Traditional Long-Term Care Insurance
- Hybrid long-term care insurance
- Use for at-home care, in a nursing home, or assisted living.
- Receive automatic payments and no receipts are required.
- Premiums are locked in with a death benefit.
- Traditional long-term care insurance
- Generally you must be in a nursing home, however, at-home care is available if you are cared for by a licensed professional.
- You are required to turn in receipts.
- Use it or lose it policy. [iv]
Get Help From A Financial Professional
To help determine if a hybrid long-term insurance policy is appropriate for you, consider reaching out and consulting with a financial professional. Everybody’s situation is different, but in today’s world, people are living longer, and because of this, more and more people may require specific care as they age. Setting up a policy may not only be beneficial for you, but it could potentially help your loved ones down the road who may be called upon to oversee your long-term care. Contact a financial professional today and see if a hybrid long-term insurance policy could benefit you.
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