This article appears in Fall Boomers magazine.
You’ve planned for retirement — more travel, more outings with the grandkids, more leisure time. But have you planned for getting older, and the health concerns that come with aging?
More are considering hybrid life insurance policies, which can provide for the expenses involved in long-term care.
“Hybrid life insurance is life insurance linked with long-term care benefits, meaning the death benefit can be paid down for expenses including in-home care or facility care when the insured meets the benefit triggers,” said Mike Hamilton, vice president of MoneyGuard Product Management at Lincoln Financial Group.
Similar to traditional long-term care insurance, the triggers are tied to the inability to perform two of six activities of daily living: bathing, continence, dressing, eating, toileting and transferring (getting in and out of bed or a chair without assistance), or a severe cognitive impairment.
When the insured is determined to be eligible for benefits, the death benefit is paid out in defined monthly amounts to cover long-term care costs, Hamilton said.
Typically this is over two to four years. Any remaining death benefit would be paid out when the insured dies. Some plans offer a small death benefit after the original has been paid out and exhausted.
Hybrid policies are not new; they have been sold for over 30 years but have gained popularity in the last 10 years, Hamilton said.
“Hybrid life insurance is a good option for consumers who are looking to insure against the possibility of needing to pay for care as well as wanting a life insurance policy,” said Larry Nisenson, chief commercial officer for Genworth Financial’s U.S. life insurance division. “Like traditional long-term care insurance, these products can be purchased to cover some portion of a person’s care expenses.”
“Long-term care funding solutions, including hybrid products, generally help with estate planning as they provide a source of funds to pay for long-term care needs rather than spending down the other assets within the estate,” Hamilton said.
Hybrid policies are medically underwritten, just like other long-term care funding solutions, so it’s a good idea to consider this option when younger and in good health, Hamilton said.
In terms of cost and payment, depending on the carrier and the insured’s age premiums can be paid either as one lump sum or potentially spread over a lifetime, Hamilton said.
A major benefit of many hybrid life/long-term care plans is that they have guaranteed policy charges, meaning the cost of the policy can never increase, assuming all premiums have been paid as scheduled, Hamilton said.
“In most cases, the cost of insurance for hybrid products is more expensive than stand-alone long-term care insurance policies. That’s why it’s important for consumers to evaluate what they are looking to cover and purchase the coverage they feel best suits their needs,” Nisenson said. “For those who already have sufficient life insurance coverage, a traditional long-term care insurance policy might be a better fit.”
When purchasing, think about which carrier to choose, how much coverage to purchase and whether to purchase the product individually or through an employer. Some companies offer group long-term care insurance that may be portable and may offer the option of family coverage, Nisenson said.
“Since many Americans turning age 65 will need to fund some type of care at some point in their lives, these types of insurance policies are incredibly important,” he said. “The costs associated with a care event are usually not covered by health care policies or Medicare, meaning people will generally have to cover these associated costs with their savings, by purchasing a long-term care insurance policy or a life insurance policy with an accelerated benefit rider, and some will have to rely on Medicaid if they run out of savings,” Nisenson said.