26 May Hybrid LTC Cost
How Much Does Hybrid LTC Cost
Americans nearing retirement age now have more options for long-term care insurance. In the event that you need Long-Term Care,
the Hybrid Long-Term Care Insurance policy will cover four forms of care:
- Health Care at Home
- Supported Living Facilities
- Homes for the Elderly
- Day Care for Adults
Hybrid LTC plans are becoming a favored choice for customers. This is because standard LTC insurance has become more expensive to compete with the new national average age of living. Not only did they experience premium spikes over the last couple of years, traditional LTCI companies have also updated their underwriting guidelines making this type of insurance more difficult to apply for. The hybrid plans operate by combining a life insurance policy or annuity with Long Term Care insurance.
The main benefit of this insurance policy strategy is that it drops the use-it-or-lose-it mentality that is common in conventional long-term care policies. Hybrid plans also have a better advantage because they offer guaranteed rates and benefits that cannot be altered in the future, providing customers with less cause for concern when applying for LTCI.
How Do Hybrid Long-Term Care Insurance Policies Work?
Hybrid long-term care programs have a straightforward definition. The majority of these hybrid plans merge life and long-term care insurance into a single policy. The Long-Term Care Insurance benefits are the primary focus, with life insurance coming in second. There are a few options for payment for these plans..
Paid in Advance
Hybrid long-term care insurance plans are commonly funded by a single lump sum premium and incorporate the advantages of a life/annuity policy with the added benefits of long-term care coverage. When paying your full premium upfront, you are provided with slightly higher monthly benefits as opposed to paying over a period of time.
Payment Plan over 5 or 10 years
Alternatively, you can choose a payment plan that allows you to liquidate other assets or dollar cost average into your hybrid policy over time. Premiums are guaranteed for these payment plans and cannot change no matter the state of the economy. Although this will lower your monthly benefits by a few hundred dollars, this option is beneficial to those who will be liquidating assets to obtain long-term care insurance.
A Single Premium Long-Term Care Insurance Policy
A life insurance + long-term care policy or a single premium long-term care insurance policy gives you more flexibility when it comes to benefit premiums to cover long-term care costs. This insurance policy effectively provides a fund that can be used to pay for long-term care for a fixed period of time or for the rest of the policyholder’s life.
These policies offer an Accelerated Death Benefit Rider for people who are eligible for benefits as they require long-term care. This basically means that if you need long-term treatment, the expenses will be covered while you are still alive and deducted from the amount of your death benefit.
Other alternative life insurance plans have a stand-alone long-term care rider that can be included at an additional cost. Long-term Care Insurance riders aren’t always available for permanent life insurance plans like Universal Life, Whole Life, or Indexed Universal Life (not term life policies).
Can You Pay for Long Term Care with Annuities?
Annuities can be a great alternative for hybrid and traditional long-term care insurance for those who do not qualify due to their medical history screening during the underwriting process when applying for LTCI. There are annuity options that don’t require any health history underwriting checks other than verification that you do not have Alzheimer’s disease or are currently residing in a nursing facility. These policies will give you a boost in your payout if you need long-term care. These plans are recommended if you have significant health problems and cannot medically qualify for a conventional hybrid or traditional long-term care insurance policy.
The hybrid LTC + Annuity begins as a deferred annuity. It may be a one-time premium or a series of structured deposits over time. If the beneficiary of the annuity does not require long-term care, the annuity receives interest and works similarly to any other fixed annuity. If the annuity holder requires medical attention, a calculation will be used to determine the monthly benefit cost.
Long-Term Care Insurance Cost Without Insurance
People purchase long-term care insurance to assist in covering most or all of the long term care services because it is quite expensive. The cost of long-term care services varies depending on the type of treatment you need, where you obtain it i.e. in your home or in a facility, the state you reside in and the length of time services are being provided. Long-term care is more costly in some states than others which has an adverse affect on LTCI premiums as well. Here are some examples of typical annual treatment costs:
Costs in a Nursing Home
The national average for nursing home treatment for a semi-private room is over $89,000 per year. That price does not include any extra services you may need, such as counseling or medication, which will increase the cost even further. The average cost for a private room in a nursing home is just over $100,00 and again this cost does not cover all services provided in nursing homes.
Costs in an Assisted Living Facility
According to the National Center for Assisted Living report, assisted living facilities cost an average of $4,300 per month in 2020 for a one-bedroom unit, averaging $51,600 per year. This price covers rent and most other expenses, but residents who need more treatment than the average patient would have additional costs for care.
Costs of Home Health Care
The total cost of basic home healthcare in the United States was $21 per hour for a home health aide. You can get unprofessional support in your home for less money, but most people prefer licensed nurses, who are more expensive. The cost of home health care is determined by the number of visits each week, the type of care required, and the duration of each visit. If assistance is needed around the clock, home healthcare can be very costly. The prices also vary depending on where you live. According to Genworth Financial, the average cost for home health care services is $4,000 per month. This cost however, can be reduced by having a family member providing some of the care services and relieving services needed by a licensed healthcare professional.
As you can see, long-term health coverage can be very expensive. So, one can ask why not go the extra mile and buy Hybrid LTC insurance? It will save you and your family thousands of dollars and can relieve your family of the stress and anxiety by knowing you are in safe hands.
Traditional Long-Term Care Insurance
A traditional long-term care insurance policy comes with a single stand-alone policy with benefits that you choose at the beginning.
- The policy you pick can be customized to meet your unique requirements.
- The premium you pick is guaranteed to be renewable.
- Monthly, quarterly, semi-annually, or annually, premiums may be charged.
- You’ll be safe as long as you keep up with your payments.
Since there is no cash benefit, long-term care insurance is very close to the other forms of insurance you might have (auto, renters, and health). Health and long-term care insurance policies are close in that you would not earn any benefit if you do not make a claim on your policy.
Since long-term care insurance rates are charged on a “pay-as-you-go” basis, they are typically inexpensive when compared to hybrid policies. However, they are not necessarily set at a fixed price, which means they can be subject to rate changes. Only a few highly ranked organizations have never asked an active policyholder for a premium rate increase.
It is critical that you comprehend the full coverage time as well as the maximum profit pool. For instance, suppose the maximum coverage term is four years and the maximum profit pool is $219,000. If your four years are up and you need more coverage, you won’t be able to get it because you haven’t met the maximum benefit pool limit. The net gain pool sum is the same. If you surpass that limit and still have three years left on your policy, you will no longer be protected.
Traditional long-term care insurance does not include death benefits, which is a drawback. Some clients get stuck on the “use it or lose it” mindset when it comes to long-term care insurance. It’s difficult to convince yourself to obtain a policy that costs thousands of dollars and run the risk of earning nothing if you pass unexpectedly.
For instance, let’s say a policyholder passes away in their mid-80s. For 19 years, they have paid around $3,250 in premiums. This means they spent over $60,000 for something he/she and the family could not use.
Regrettably, this is how most forms of insurance work. You pay for a policy over an extended period of time, yet get nothing in exchange. Yes, this can be both good and bad. It’s a positive sign because it means you’re either alive or haven’t been disabled. It can be problematic because some people believe the money was wasted.
Consider this: if you opt for a term life insurance policy, you would never wish you had passed during that time period in order to avoid wasting the money. The same can be said for auto insurance. You pay it every year and never wish you had been in an accident to save money. When it comes to long-term care insurance, certain people have this mentality.
A Hybrid long-term care insurance policy is an excellent option for this fear of spending money.
Hybrid Long-Term Care Insurance
Long-term care insurance that is asset-based is known as hybrid long-term care insurance. A long-term care “rider” is applied to a permanent life insurance policy with these items (whole life or universal life products, not term life).
Long-term care insurance is paired with universal life insurance or a fixed annuity in hybrid insurance. This type of policy has a number of advantages that conventional long-term care insurance does not.
One of the benefits this plan offers is that a policyholder may choose their payment plan. They can choose to pay a single upfront premium, a collection of premiums for a set period, or continuing premiums. Many individuals are drawn to this form of long term care insurance because it eliminates the possibility of potential rate increases by paying a guaranteed single premium or series of premiums. You can get a tax-free advance on your life insurance death payment to pay for long-term care while you’re still alive with the long-term care feature.
These plans have a “surrender period,” which ensures you can’t access the money until the period has expired without incurring a penalty. The money will rise in value and be saved while it is owned by the insurance company. For cash value growth, most policies offer a fixed interest rate.
Long-term care insurance like this is fantastic because it can be used as a fixed-income fund, as well as cover long-term care and have a life insurance benefit.
Additionally, if you change your mind in a few years, you will get much if not all of your premiums back. If you keep your policy in force, a death benefit will be paid to your heirs when you pass away. When it comes to choosing an insurance policy, many people prioritize leaving an inheritance. People love knowing that the money they paid in premiums will be passed on to their children at some point in the future.
These guarantees are not included in conventional long-term care insurance plans. Insurers may lobby state insurance agencies to increase the premiums by up to 50% a year. The rise in rates is unaffordable for those with minimal assets. If you never need long-term treatment, hybrid insurance plans promise that you can get your money back.
How Much Can You Save With a Hybrid Long-Term Care Policy?
Depending on the insurer you chose, a hybrid policy can cost you between 5% and 15% more than a standalone life insurance policy because you are paying for the life policy additional to the long-term care policy. As opposed to the cost of a conventional long-term care program, which can range from $2,500 to $3,500 (or more) per person per year and if you don’t need long term care until you’re in your late 80’s you could end up spending close to $70,000 or more total in premiums which is close to the average cost of a hybrid policy. Keep in mind, insurance premiums vary from person to person and the price you pay when you are young and healthy is much lower than when you are older and more vulnerable to illness or injury. A secondary factor used when decided premium costs is gender. Females on average live longer than males and on average spend more time receiving care. This categorizes women as a higher risk factor than men thus creating higher premiums for women.
Your net worth will decide whether you prefer a hybrid long-term care insurance plan or a conventional long-term care insurance policy. People in their 50s and 60s, on average, would need to spend $70,000 to $150,000 per person in a hybrid plan to obtain long-term care benefits equivalent to those of a conventional long-term care plan. You can pay a single premium or spread it out over five to ten years for hybrid long-term care firms. There are no more premiums to be paid at any time in the future.
Hybrid life and long-term care insurance plans merge two forms of coverage into one package. Premiums can be set for life and not subject to inflation, as they are for stand-alone policies. If a continuation-of-benefits rider is included, these plans may also be helpful for those looking for lifelong or unlimited long-term care benefits.
Different Types of Hybrid Policies
Permanent life insurance plans, rather than term life insurance policies, offer long-term care benefits. These hybrid products come in a range of shapes and sizes.
A true hybrid policy that incorporates life insurance and long-term care insurance. The long-term care insurance rate is typically equal to around five times the premium you pay. A healthy 55-year-old man who paid a $100,000 lump-sum premium could receive long-term care benefits worth nearly $523,000, for example. The death benefit will be $174,000 per person.
According to the American Association for Long-Term Care Insurance, linked-benefit coverage accounted for 84 percent of long-term care insurance purchases. Long-term care insurance was just 16 percent of the total.
Long-Term Care Rider on a Life Insurance Policy:
This option allows you to add long-term care coverage to your life insurance policy when you purchase it (it cannot be added later). However, the long-term care benefits are not as comprehensive as with a conventional long-term care policy or linked-benefit policy.
The Cost of Hybrid Coverage
A hybrid policy would cost more than a stand-alone long-term care policy for long-term care coverage. The premiums shown below are for an average 55-year-old couple in good health.
Single Premium Linked Policy
Life Insurance Premium: $57,200
Long-Term Care Premium: $36,900
Total Premium: $94,100
Death Benefit: $150,000
Long-Term Care Benefit: $4,500 monthly limit per person
Total Initial Long-Term Care Benefit: $300,000 (amount increases over time)
Cash surrender value: $39,000 (first year) up to $150,00
Recurring Premium Linked Benefit Policy
Annual life insurance premium: $3,500
Annual LTC premium: $2,100
Total premium: $5,600
Death Benefit: $150,000
Long-Term Care Benefit: $4,500 monthly limit per person
Total Initial Long-Term Benefit: $300,000 (amount increases over time)
Cash Surrender Value: $0 (year one) up to $150,00
Despite their general similarity, hybrid life insurance and conventional long-term care insurance have some variations. In most cases, alternative life insurance is more costly than conventional long-term care insurance. Hybrid plans are often charged in one lump sum or over a period of a few years, typically no more than ten. Premiums for conventional long-term care insurance may grow over time, but payments for hybrid plans are guaranteed and do not change.