Life Insurance, Lifetime Long Term Care coverage, and Guaranteed Premiums: An example of a Hybrid Long Term Care Policy


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Many retirees come to us wanting to know how they can better use the money they have in retirement. They are also highly aware of the risk of outliving their money.

Usually, the one event that is going to send their budget sideways is the cost of long term care. For these people, hybrid long term care insurance can work really well.

Hybrid long term care insurance has the ability to turn on a stream of income exactly when you need it. If you don’t need care, your loved ones get a sum of money (usually a  life insurance payment) when you pass.

We will go over a specific hybrid long term care policy below. If this specific policy doesn’t seem like it fits your budget or lifestyle, Cardinal will make sure to find the right solution for you.

Example of a hybrid long term care policy

This specific hybrid long term care insurance example is illustrated for a couple, both aged 65, non-smokers, who live in North Carolina.

Effectively, this couple is going to pay $19,285 a year, or around $1,600 a month, to get coverage for both of them. They will pay this over 10 years. In the end, they will have put $192,850 into this policy.

As you can see, this buys them $225,000 of life insurance benefits. It also buys them a lifetime of long term care benefits that covers the both of them. We will get into the significance of both of these benefits below!

Do I have to be married to get this policy?

No, this policy can also be designed and purchased for someone who is single.

The joint protection option is what allows you to cover 2 lives under one policy.

What age should I buy this policy?

While we demonstrated the price for a 65-year-old couple, this policy is actually priced very favorably for consumers who purchase it in their 50’s.

While it still provides great coverage to those who purchase it later in life, buying most types of long term care insurance in your 50’s is going to get you a better deal.

What are the options to pay for this policy?

This policy can be paid in a lump sum or over a set amount of years, such as 5, 10, or 20 years. In the example above, we used 10 years.

The premiums for this policy will never increase. Unlike many long term care insurance policies, you are going to know what you are going to end up paying. There will be no surprises.

What does my health have to be like to qualify for this policy? 

You do not have to be in excellent health to qualify for this policy. They are lenient when it comes to health history.

Usually the qualification process for this policy is going to include some combination of a paramed visit, a phone interview, and/or a review of your medical records. Overall, it is not a complicated process.

Smokers can qualify for this policy, but the premium will be higher.

It is important to note that when you are looking into insurance, like hybrid long term care insurance, it is beneficial to work with an agent who represents multiple companies and insurance options. This way, the agent will be able to make sure you have a good chance of qualifying based on your health before putting you through the application process.

What triggers this policy to start?

Like most long term care policies, if you cannot perform at least 2 of the 6 Activities of Daily Living, this policy will start paying. The Activities of Daily Living include bathing, maintaining continence, dressing, feeding, toileting, and transferring.

This policy will also start to pay if you require care as a result of a severe cognitive impairment, such as Alzheimer’s. Some long term care policies do not use cognitive care as a trigger, but this one does.

The Life Insurance Benefit of Hybrid Long Term Care Insurance 

Hybrid long term care insurance is so named due to the fact that it combines 2 different products: life insurance and long term care insurance.

While this policy provides a life insurance benefit, this benefit is not what you are purchasing the policy for. If you just want life insurance, we will have better products to offer you.

The life insurance on this policy is there just in case you and your spouse do not end up needing long term care. If you do not use the care benefit, then the premiums you paid into this policy did not “go to waste”.

If you die without needing care, you heirs, or children, will get $225,000 of life insurance benefits.

If you needed some care, but not $225,000 worth of care, your heirs will get what is left of the $225,000, paid as a life insurance benefit.

Lifetime Long Term Care Benefits (for 2 individuals) 

Possibly the largest reason people purchase this specific policy is its continuation of benefits rider. This rider allows you to extend the long term care coverage from just a few years up to your entire lifetime.

That means this policy allows you to transfer almost all the risk of needing long term care services in your lifetime to the insurance company.

For the policy illustrated above, the couple is paying for lifetime coverage. That is so important because it is almost guaranteed that at least one of them is going to have a significant long term care bill. This policy will pay for that.

The average cost of home health care yearly in 2019 was over $51,000The average cost of a nursing home room was $102,200.  If both spouses end up needing a significant amount of long term care, this policy will become worth way more than they put into it.

Once you qualify to start the benefits, this policy will pay for almost any level of care, including home health care, assisted living, nursing home, adult day care, and hospice.

What is the waiting period for this policy? 

The waiting period, sometimes referred to as the elimination period, is the amount of time it takes for the insurance company to start paying once you trigger the benefits.

With this specific policy, if you turn it on and need home health care, the waiting period is 0 days. The policy will start paying on day 1.

If you turn it on and need another type of care, say from a nursing home, the waiting period is 90 days. While you still must fund these 90 days, after that, you have a lifetime of care paid for, for both you and your spouse.

Inflation Protection for Hybrid Long Term Care Insurance

When shopping for long term care policies, it is important to consider whether your policy will include inflation protection. This policy includes 3% inflation protection .

The price for long term care has been and will continue to increase. This inflation protection will make sure you have enough in benefits to cover your care, even if you don’t need care for 20 years.

The policy illustrated above is just 1 specific example of a hybrid long term care insurance policy. There are many many more options out there.

Make sure to work with a fiduciary, who has to put your best interest first, to find a solution that works for you, your budget, and your family. Cardinal can help.

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