Compare Hybrid and Traditional Long-Term Care (LTC) Insurance
Traditional LTC insurance (LTCi) is a standalone policy that reimburses you for eligible long-term care services in exchange for a premium that in most policies can increase. The premium is waived while you are receiving benefits. If you do not need care, your premium stays with the insurance company to pay claims for people who need care. A hybrid policy combines life insurance or an annuity with long-term care coverage and returns money to heirs if little or no care is needed. Inflation coverage on both traditional and hybrids is optional but highly recommended.
Hybrid policies have become more popular in recent years with about half of consumers choosing hybrids and half choosing traditional LTCi.
Even though hybrid policies may cost more, they provide more guarantees:
- a guaranteed premium and a way to pay it off
- a guaranteed benefit at death to your beneficiary if care is never needed or if the care needed is less than the death benefit
An LTC-focused hybrid policy provides benefits in two ways:
- Long-term care benefits: If you need long-term care, hybrids first use the policy death benefit or annuity account value and typically provide an additional amount of LTC coverage much greater than that. It is like attaching a standalone policy to cover the longer-duration risk of long-term care expenses.
- Death benefit: If you never use the long-term care benefits, your beneficiaries will receive the full death benefit or annuity account value when you pass away. If you use some long-term care benefits, your beneficiaries will receive the remaining portion of the death benefit or annuity account value. A few have a residual death benefit even if your care equals or exceeds the death benefit.
Which of these popular LTCi solutions is right for you?
An LTCI Benefit Calculator is Now Available
As you consider your long-term care plan, I’ve provided a calculator on the right side of this page. It’s simple to use and will help you determine the amount of benefit that is right for you based on your budget. Remember, a good long-term care plan is one you can afford well into the future, so create your plan with that in mind.
The calculator shows you how much benefit you can purchase based on the premium you pay. The calculator reflects total benefits vs. total premiums paid. When you consider that the annual median cost of home care or a nice assisted living facility is at least $6,000 per month, you want to consider what might get you close to that number, staying within your budget.
P.S. If you are here because you saw my letter about helping people protect their retirement savings from a down market while finding a way to pay for long-term care regardless of what kind of health you are in today, you are also in the right place. Or, if you didn’t receive my letter but this thought appeals to you, send me a comment so I can get back to you on how to do that.
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Thank you for this – I have never heard Suzi ORMAN recommend LTCI so this was an interesting segue for her. I notice below the calculator only assumes a 3% inflation but you mention 5% in your video. So I assume I should add a couple more % onto the premium suggested below.
Under hybrid, the rates jump significantly. My husband is 66 and I am 58. The rates are huge. We are healthy now – no underlying conditions and very active – are there “discounts” for that? I understand healthy people have accidents or strokes – but it does seem like the premiums are very high.
Author
I’m so glad you wrote me Dawn. Yes there are significant discounts for couples. Two companies will put a couple on the same policy which can also result in a savings. Plus, there may also be a discount for
really healthy people, depending on the company.
Concerning the inflation, I do project future costs at 5% compound. However the insurance companies have made that very expensive. The way to get around it is too buy a larger initial benefit with 3% inflation. For example, a $7500 monthly benefit with 3% winds up about the same in 25 years as a $4500 monthly benefit with 5% compound. But you buy what you can afford. The insurance isn’t intended to pay the entire cost.I want you to think about however much the policy covers at claim
time is how much discount you will get on the cost of care.
I urge you to complete the short questionnaire on my website at http://www.GotLTCi.com and request a free, no-obligation consultation with one of my team. They are all exceptional and can help you figure out what you can afford. You need to pursue it now as it gets more expensive each year you wait. Plus you could have an accident or develop a serious health problem that will make you uninsurable.
Thank you for your comment and FYI, Suze has been recommending LTC insurance since I met her in 1994 😉
Thank you for this – I have never heard Suzi ORMAN recommend LTCI so this was an interesting segue for her. I notice below the calculator only assumes a 3% inflation but you mention 5% in your video. So I assume I should add a couple more % onto the premium suggested below.
Under hybrid, the rates jump significantly. My husband is 66 and I am 58. The rates are huge. We are healthy now – no underlying conditions and very active – are there “discounts” for that? I understand healthy people have accidents or strokes – but it does seem like the premiums are staggering.
Thank you for building my understanding of LTC.
Author
You are so welcome Dale. Now go educate all those you know. Families without a plan have such a tough time when care is needed.