The reasons for having a life insurance policy are well established. It should be a part of every financial plan. It will provide for your family and loved ones when you’re no longer here, but it can also provide other valuable financial opportunities.
Providing long-term care should also be a part of your financial plan, too. You may be healthy and fit now, and being unable to care for yourself one day may seem unlikely. However, statistics show that’s not the case. Someone turning age 65 today has almost a 70 percent chance of needing some type of long-term care services or support in their remaining years. Women need care longer (3.7 years) than men (2.2 years). Medicare does not cover long-term care, so it’s important to consider how you would cover these costs, should you need the assistance.
Many people know someone who has run into this problem. The assets built over the course of a lifetime disappear when a loved one needs long-term health care. “I think it’s safe to say that most people would prefer to pass along their savings onto their heirs, rather than to a nursing home or a home health aide,” says Joseph Aspelund, Director of Insurance Sales at David Lerner Associates, Inc., “a customized hybrid life insurance policy may be a practical solution.”
So why not just purchase a long-term care policy? Stand-alone long-term care policies have several disadvantages, including the fact that you “use it or lose it.” You could pay for LTC insurance for many years and if you don’t need it, you get nothing back. Additionally, when it’s time to use the LTC benefit, stand-alone policies usually have a “reimbursement model” that requires qualifying receipts before payments are made. The hybrid models generally use an indemnity model that pays a cash benefit without the need to submit receipts. The indemnity model allows you to choose a family member to be a caregiver. And importantly, the underwriting can be less stringent on a hybrid life-insurance policy making it easier to qualify for coverage.
There are many different hybrid life insurance programs available, but generally, the hybrid includes some sort of life insurance payment to your beneficiaries. So, if you don’t need LTC your heirs will receive some money.
- Linked Benefit Life Insurance. Insurance companies consider this the “true hybrid” policy. It’s similar to a long-term care policy but includes some sort of death benefit. The death benefit is based on how much long-term care you used. If you didn’t use it at all, the death benefit will usually be at least what you paid into it, and more if the cash value has grown.
- Life Insurance with a Long-term Care Rider: This type of policy generally accumulates cash value over time. You can access that cash for long-term care expenses. Your beneficiaries will receive whatever remains of that cash value upon your death.
“Even though retirement may seem far off, it’s important to have a strategy in place to deal with any circumstance,” says Aspelund “A hybrid life insurance policy is one way to protect yourself and your family from any possible unforeseen medical costs and give you peace of mind now and in the future.”
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