Long-term care planning is vital for just about everyone. Barron’s, a leading source of financial news, commented on the importance of long-term care in their article Having a Long-Term Care Plan Is Crucial. Here Are 2 Hybrid Policy Types to Consider*. We wanted to share some of the great points with our New Wave team and clients!

They started off by highlighting the state of long-term care planning:

For millions of baby boomers, Gen-Xers, and millennials who have no long-term care strategy, the pandemic has sent a message: Act now or it will cost you later.

It’s a sobering task no matter your financial situation to plan for the possibility of some future incapacitation. But putting it off until too late can have dire consequences for your savings. The reality is that more than two-thirds of Americans over the age of 65 will need some sort of daily care for an average of three years during their lifetime, according to the Urban Institute. 

Those costs can quickly add up. A stay in a nursing home can cost over $100,000 a year, and even care in your own home can easily top $5,000 a month or more.

How does long-term care insurance work?

An LTC insurance policy will help cover the costs of any necessary care you may need if you end up with a chronic medical condition, disability, or disorder such as Alzheimer’s disease. Most policies will reimburse you whether that care is given in your home, a nursing home, an assisted-living facility, or an adult daycare center. 

You become eligible for benefits only when you can’t do at least two “activities of daily living,” or ADLs, on your own. These typically include bathing or showering, going to the bathroom, getting dressed, eating, and getting in and out of bed or a chair. 

They went over some of the options available as well.

While traditional plans are still offered today, about 90% of policies sold now are what experts refer to as “hybrid” policies, namely a life insurance policy that is either linked to an LTC policy (also called an “extension”) or has a rider attached, says Erik Miller, product strategist with Life Happens, a life-insurance industry consumer education nonprofit. 

An LTC or chronic illness rider allows you to either use a portion or all of your life insurance’s death benefit while you’re still alive to pay for long-term care expenses (otherwise that money would go to your beneficiary). These kinds of add-ons as well as the linked products are appealing to many because they solve the use-it-or-lose-it problem of traditional policies—if you don’t end up needing to use those funds for LTC, you still get the death benefit.

But the insurance industry doesn’t make it easy for the consumer: Figuring out which hybrid plan to buy requires wading through a labyrinthine set of provisions and fine print for each product.

When it comes to how to choose, they brought out:

If you’re more interested in knowing you have good LTC benefits in place, a linked benefit policy may be best for you, since it tends to offer better LTC benefits than a life policy with an LTC rider. Also, only with a linked benefit policy can you add an inflation option (you will need to pay extra for it), which allows for the value of your benefit to grow to at least 5 to 6 times what you paid for it. 

If your primary focus is having a death benefit for your heirs, but you want the comfort of knowing you could use that money for LTC if necessary, then a life policy with either an LTC rider or something called a chronic illness rider, would likely be best for you. 

They finished with this stellar point:

Whatever you do, if you’re approaching or in your 50s, now is the time to figure out what kind of planning will work best for you because the healthier and younger you are, the less your policy will cost in the long run, says Ballin. ”

We’re grateful for informative articles like this. The best time to plan for your future care is now. To ease the burden on yourself and your family members in the future, long-term care insurance can help!

*Barr, Naomi. “Having a Long-Term Care Plan Is Crucial. Here Are 2 Hybrid Policy Types to Consider.” Barron’s. 21 Aug. 2022 https://www.barrons.com/articles/long-term-care-insurance-ltc-51660935788