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In that location'due south a good chance you lot'll need long-term care as y'all age. But if you're like many Americans, you probable don't have a plan to pay for this sort of care.

Although about half of adults turning 65 today volition develop a disability that is serious enough to require aid with daily activities of living, but eleven% have long-term intendance insurance coverage that volition aid pay for the price of intendance, according to the Urban Institute. Oft, people don't recognize the need for this sort of coverage because they underestimate the cost of intendance. And they mistakenly presume that Medicare and health insurance will cover long-term care.

Plus, the cost of long-term care insurance tin exist a deterrent to getting coverage. "Traditional plans take a bad rap considering in that location have been and then many hikes in premiums," says Matthew Sweeney, life and long-term care specialist with Coverage Inc. in Virginia. "When people hear 'long-term care insurance,' they say, 'I'm non interested.'"

The idea of paying hefty premiums for coverage they might not need leaves a bad taste in people'due south mouths. But there is an culling to use-it-or-lose-it traditional long-term intendance insurance. Hybrid life insurance products provide long-term care coverage if there is a need, or a death benefit if the policy isn't used to pay for care.

Earlier opting for one of these products, understand what they are and whether they're right for yous.

The High Cost of Long-Term Care

If yous're wondering why you fifty-fifty need to bother with insurance to help pay for long-term care, consider the cost of care. According to insurer Genworth's 2019 Cost of Care Survey, the median monthly cost of an assisted living facility is $four,051.

If you want to receive intendance in the comfort of your home, the median monthly cost of a home health aide is $four,385. The median cost of a private room in a skilled nursing facility is $8,517 a month. Genworth estimates that those costs will about double over the next 20 years.

So if you're in your 50s now and will need care in your 70s, you might have to spend $100,000 to $200,000 a year. For those who need a loftier level of care, the average length of care is three.9 years, according to the Bipartisan Policy Center. If y'all fall into that category, your care could cost you several hundred thousand dollars.

Why You Can't Count on Medicare or Medicaid to Help

Medicare—the regime health insurance programme for adults age 65 and older—will pay for curt stays in skilled nursing facilities for rehabilitation or therapy services subsequently a hospital stay. Information technology will not pay for long-term intendance, which is help with what are called the "activities of daily living":

  • Bathing
  • Dressing
  • Eating
  • Using the toilet
  • Transferring (to or from a bed or chair)
  • Caring for incontinence

This is the type of care that someone who is experiencing physical or mental decline might demand. It can exist provided at home, through customs-based services such as adult day intendance or in a facility.

Medicaid—the joint state and federal health care program—will embrace the toll of long-term care at abode and in skilled nursing facilities. It currently is the primary payer in the nation for long-term care services. Withal, you must take limited income and assets to qualify for Medicaid. Income requirements vary by state, only, typically, your assets (excluding your home and one car) can't exceed $two,000 every bit an private or $3,000 as a married couple.

Unfortunately, at that place may be lilliputian sensation of these downsides. Many people plan to rely on Medicare or Medicaid to pay for long-term intendance, according to a 2018 study by Lincoln Financial Group and Versta Research.

How Insurance Can Aid

Long-term care insurance can exist used to pay for help when the policyholder can't perform two of the six activities of daily living or has cognitive impairment, says Tim Dona, president of Newman Long Term Care, an independent insurance brokerage firm in Minnesota. It covers the cost of care at habitation, in adult day care, in assisted living facilities and skilled nursing facilities.

Near long-term care policies likewise will encompass modifications to your abode to make it easier to remain at that place to receive care, Dona says.

The amount of coverage a policy volition provide will depend on the do good period and do good amount you choose. The average benefit period policyholders cull is iii years, Dona says. And a typical plan pays out $three,500 to $5,000 a calendar month in benefits. The maximum benefit is then based on the monthly benefit amount and benefit period. For example, a long-term care policy with a $5,000 monthly benefit and a iii-year benefit period would have a maximum do good of $180,000.

Depending on how long you demand care and how much it costs, long-term care insurance can help encompass some or even all of the cost of intendance.

But traditional long-term care policies are a use-it-or-lose it suggestion. "If you don't demand long-term care, you're left with that feeling that all of those premiums were for nothing," Dona says.

How Hybrid Insurance Solve the Use-It-or-Lose-Information technology Problem

Life insurance policies that include a long-term care benefit convalesce the concern about paying for coverage you may never use. They can be used to pay for long-term intendance expenses and will pay a death benefit when the insured person dies. That's why these hybrid policies have go more than popular than traditional long-term care insurance.

The 2020 Insurance Barometer study conducted past Life Happens and LIMRA constitute that the top reasons people buy combination life products is to be economical with their resources, to alleviate anxiety over long-term care expenses, and to avoid the expense of two policies, says Jon Voegele, chairman of Life Happens, a nonprofit insurance teaching resources.

"Nevertheless, the main consideration is to look at your needs and enquire several questions about the need for life insurance and long-term care," he says.

That'southward because the amount of long-term intendance coverage you lot get will depend on the type of coverage you lot purchase. And your death benefit will be impacted if you tap the policy to pay for long-term care.

Types of Hybrid Life Insurance Products

Life insurance policies that include long-term care benefits are permanent life insurance policies, non term life policies. In that location are a few different types of these hybrid products.

Linked benefit: This is a truthful hybrid policy that links a life insurance policy with a long-term intendance policy. Typically, the long-term care benefit amount is equal to about five times the premium yous pay, Dona says. For example, a healthy 55-year-onetime human who made a $100,000 lump sum premium payment could get long-term intendance benefits worth nearly $523,000. The death benefit would be $174,000, based on a quote provided past Newman Long Term Intendance.

According to the American Association for Long-Term Intendance Insurance, 84% of long-term care protection purchased in 2018 was linked-benefit coverage. Just 16% was stand-lonely long-term care insurance.

Long-term care passenger on a life insurance policy: This feature allows you to add together on long-term coverage to a life insurance policy at the time you purchase the life insurance policy (information technology can't be added afterwards). Mostly, the long-term care benefits are not as robust as with a traditional long-term care policy or linked-do good policy, says Craig Roers, head of marketing for Newman Long Term Intendance.

"This approach might be good for someone where life insurance is more of a business organization than long-term care insurance, equally the long-term care is sometimes a 'by the way,'" he says.

Both of these products will pay out through reimbursement of the actual cost of intendance or an indemnity model that pays a sure cash benefit regardless of the actual toll of care. When y'all use the long-term care benefit, the death benefit is reduced. However, well-nigh of these policies even so offering a death benefit of $15,000 to $20,000 if you lot apply all of the coverage for long-term care, Dona says.

Chronic disease or critical illness rider: This feature on a life insurance policy would permit yous to accelerate the death do good to pay for care if you lot have a chronic illness that volition final for the rest of your life.

"It would not cover something like extended care needed due to a hip replacement, just true long-term care insurance would," Roers says. These riders use the indemnity model for payouts.

Pros of Hybrid Life Insurance

In improver to paying a death benefit if long-term care isn't needed, hybrid products accept other features that make them more attractive than traditional long-term care insurance.

Pro: The premium is guaranteed on hybrid products and won't increment over time, Voegele says. This appeals to consumers because premium increases (sometimes very high) were mutual with traditional long-term care insurance policies in the past. Now insurers are able to price long-term care policies more accurately, so rate increases are less probable, according to the National Association of Insurance Commissioners.

Pro: Hybrid products offer flexible premium payment options. You can make one lump-sum payment or pay premiums over fourth dimension, Dona says. Traditional long-term care policies typically don't offering a single premium payment option.

Pro: It can exist easier to authorize for coverage because the underwriting tin be less stringent with a hybrid policy than a traditional long-term care policy, Voegele says.

Pro: A hybrid policy might allow you lot to pay a family member who provides intendance for you, Dona says. If it uses an indemnity model that pays greenbacks rather than reimbursement for the actual cost of intendance, you could use that cash to pay a family caregiver. This isn't an option with traditional long-term care policies, which pay claims by reimbursement only.

Pro: Permanent life insurance policies build cash value, which you can tap to cover expenses other than long-term care. Stand up-lonely long-term intendance policies don't accept cash value.

Cons of Hybrid Life Insurance

The biggest con of a hybrid product is that you're not getting the best coverage for your coin, Dona says.

"Y'all don't need to pay the insurance visitor to bundle them for you," he says. If your top business organisation is long-term care, you'll get more coverage for your money with a stand-solitary long-term care policy. And it will be cheaper than a hybrid policy because you're not paying for the life insurance benefit.

For example, a couple age 55 would pay $5,532 annually for a linked-do good policy with a $150,000 death benefit and $330,000 long-term care benefit, Dona says. However, they would pay $4,000 annually for a stand up-alone long-term care policy with a $330,000 do good.

Other drawbacks to hybrid policies include the following:

Con: Hybrid policies accept limited ability to be customized for individual needs, Voegele says. For instance, the period you must wait before benefits boot in is typically xc days with hybrid policies. Traditional plans tin take elimination periods that range from 30 days to ii years, he says. A longer flow tin can lower the premium.

Con: Long-term care payouts tin substantially reduce greenbacks value or the death do good of a hybrid policy. If you bought the policy because you have loved ones who will need the death do good, that benefit might non be in that location when they need it.

Con:Hybrid policies don't e'er include an aggrandizement protection selection, Roers says. This pick increases the price of a policy, but it allows the value of the policy to increment with the rising cost of long-term care.

Con: The revenue enhancement benefits of hybrid policies might non exist as generous. Both hybrid and traditional long-term intendance insurance payouts are revenue enhancement-free. However, if you're cocky-employed, you can deduct the cost of long-term intendance insurance premiums. With a hybrid policy, you lot tin't deduct the full premium—only the portion that goes toward long-term intendance coverage, Roers says.

Con: Traditional long-term care policies frequently are eligible to be part of land Medicaid partnership programs. With a partnership policy, you don't have to spend down all of your avails to qualify for Medicaid. Hybrid policies are not eligible for these partnership programs, Roers says.

How and When to Buy a Policy

Lincoln Fiscal Grouping and OneAmerica are the top 2 providers of hybrid life insurance policies, Dona says. Other insurance companies that sell this type of coverage include Nationwide, Pacific Life and Securian Fiscal.

Virtually people who buy stand-solitary long-term care coverage tend to be in their early 50s. Those who buy hybrid policies tend to exist older, Dona says. Some hybrid life insurance carriers will even issue policies to people up to age 85.

One reason hybrid insurance policy buyers tend to be older is because these products were originally designed to be purchased with a large lump-sum payment of $fifty,000 or $100,000, Dona says. Older adults are more likely to have that sort of cash in savings or an annuity.

It also can exist easier to qualify for a hybrid policy than a stand-alone long-term care policy if you're older because the underwriting is less stringent. Insurers tend to be more than relaxed near the medical atmospheric condition they'll have and notwithstanding issue a policy, Dona says. Notwithstanding, premiums will exist lower if you're younger and in practiced health.

When applying for a policy, you'll have to make full out a questionnaire most your wellness and have a phone or contiguous interview. The insurer might check your medical records and prescription history, and might require a life insurance medical examination, Dona says. If your health is an issue, yous might be able to buy an annuity with a long-term care do good because you will simply have to answer a serial of questions. This option does not include a death benefit, though.

The Cost of Coverage

You'll pay more for long-term care coverage with a hybrid policy than with a stand-alone long-term care policy. Withal, hybrid policies tin exist cheaper for women, Dona says. Men pay more because the life insurance component is more expensive for them.

The following sample premiums provided by Newman Long Term Care are for a couple age 55 in skilful health.

Single Premium Linked-Benefit Policy from OneAmerica

Recurring Premium Linked Benefit Policy from OneAmerica

Other Ways to Use Life Insurance to Pay for Long-Term Care

If you already have a permanent life insurance policy you might be able to convert it to a hybrid policy using a 1035 exchange, says Sweeney of Coverage Inc. Yous must authorize wellness-wise for the new policy, and you must take built upward enough cash value in the existing policy to fund the new policy.

You also could use a cash value life insurance policy to pay for long-term care. Y'all tin take a loan, withdraw cash or fully surrender the policy for the cash value.

You lot could sell a permanent life policy to a life settlement broker for cash if you're age 65 or older. You'll get less than the decease benefit but more than the cash surrender value. Exist conscientious considering the payout might be taxable.

If you accept a term life policy, you might be able to admission a portion of the death benefit while y'all're still living to pay for intendance. Term policies typically accept an accelerated death benefit rider that lets you use upward to 50% of the death do good amount if you're terminally ill, Sweeney says. The payout might exist taxable, and it will reduce the expiry do good that your beneficiaries receive.

Before you lot apply whatsoever of these strategies, read the fine print of your insurance policy. Sweeney recommends talking to your insurance agent to empathise the implications and review the downsides.

And if you're considering a hybrid policy or a stand-alone long-term care policy, work with an agent who specializes in long-term care coverage. One-size certainly doesn't fit all. Then yous'll demand an expert to assist y'all weigh your options.