Is Long Term Care insurance on life support? There are new insurance products now available that might offer better long term care benefits than a traditional LTC policy.
Did you know that 70 PERCENT of people over age 65 will need long term care? And there’s a 91 PERCENT chance that either you or your spouse will need long term care…at some point.
Long Term Care (LTC) is defined as needing assistance with the basic Activities of Daily Living (ADL), which include: Eating, Dressing, Bathing, Toileting, Continence, and Transferring.
Since the early 1970s, Long Term Care insurance has helped many families financially deal the high cost of long term care. A traditional Long Term Care policy can help you pay some of the high medical costs that are associated with delivering this type of special care (home health care, assisted living expenses, nursing home confinement, etc.), which can run as high as $150,000 a year.
But traditional Long Term Care insurance has a few drawbacks. It’s expensive and premiums can and do increase from time to time, as they are not guaranteed. Plus, since these policies don’t accumulate cash value, so if you cancel the policy, there’s no partial refund or cash back. And if you want to get best rates, you need to buy this type of product when you’re young and healthy.
Because of these drawbacks and more, some insurance companies have actually stopped selling Long Term Care policies altogether, according to a recent article in the Chicago Tribune.
Are there any new LTC insurance products out there?
Over the last few years, several insurance carriers have been offering some products that are more flexible for consumers concerned about planning for their possible future LTC needs. They’re called “hybrid” policies. A hybrid policy combines the best parts of two different types of product into a single policy.
A Long Term Care/Life Insurance hybrid policy can pay for long-term care that regular health insurance or Medicare doesn’t cover. As reported in the New York Times, sales of such hybrid polices have doubled since 2008, to more than $2.4 billion in 2016, according to the Life Insurance and Market Research Association (LIMRA).
The two basic LTC hybrid policies are:
Life insurance with an Accelerated Death Benefit Rider – This type of hybrid policy doesn’t technically deliver long-term care coverage. It just hastens the delivery of your life insurance policy’s death benefit, so YOU can personally prosper from it, instead of your beneficiaries. The benefits of this particular type of rider are essentially the same as a standard, separate Accelerated Death Benefit policy. This specific type of rider is not offered by all insurance carriers.
Life insurance with LTC Rider – This type of hybrid policy does offer LTC-style benefits, but costs more. Policies are available in both single-premium and pay-as-you-go designs. The healthier you are, the less you’ll pay in premiums. If you don’t end up using the LTC benefits, the pot of money those policies create is simply paid out to your beneficiaries at your death.
These LTC riders generally are only available with Permanent Life policies, such as Universal Life, Indexed Universal Life, and Whole Life.
So are individual Long Term Care policies D.O.A.? Well, if traditional LTC polices are not dying, they’re definitely on life support. But these new LTC hybrid products are more consumer-friendly and offer more options, without reinventing the wheel.