Hybrid Insurance Policies Offer Long Term Care Option

posted on

As people continue to live longer, it’s becoming clearer that no retirement plan can be considered complete without some form of consideration for how nursing home care or long term care is going to impact how long retirement savings will be able to last. A 65 year old man has a 30 percent chance of living to age 90, while a 65 year old woman has a 30 percent chance of living to age 93 according to recent information from a study. Obviously, this poses a significant focus on long term care and the quality of care during these crucial final years of life.

Longer lives mean that more people will need to select some type of assistance later on in their lives, especially if they are not able to rely on family members or loved ones to take care of them. Although a lot of people dislike the idea of using a nursing home in their final years, it is becoming a more common option. Unfortunately, as it is becoming more common, it is also becoming more costly in many circumstances. Although not everyone has to spend their final years in a nursing home, there is a one in two chance that eventually people are going to need some form of long term care.

The high cost associated with long term care forces many retirees to rely on their family members for assistance. When children or other relatives are not able to help, then covering the expenses associated with care can be an issue because Medicare only provides limited long term care. Medicare will pay for skilled nursing care after a hospital stay, but that is only for a period of 100 days. When care is necessary for a longer period of time, then the retirees must be able to utilize their own resources instead or rely on the use of a long term care insurance policy to cover those costs.

To try to counteract the reluctance for insure against some of the future long term care expenses, insurers have been working towards releasing new hybrid insurance contracts instead as an alternative to the traditional policies. These policies combine an annuity contract or life insurance contract with a provision to pay a pre-determined amount for long term care services when they are needed in the future. If the individual stays healthy throughout their lifetime and never needs to use the long term care coverage, then the assets that are left in the life insurance contract will be given to a beneficiary instead. This way, the premium dollars can be left for those in the family if the need for care never arises or it can be used by the policy owner before their death if they need additional retirement income. The insurance can be funded with annual premium payments instead of a large lump sum; it can also be funded by re-purposing a current life insurance policy or annuity from a tax free exchange of the contracts into a new hybrid policy.