Deciding how to pay for potential long-term care needs down the road is a complex financial planning issue that most retirees need to address. Whether due to illness, injury, or age, many older adults will one day require some type of daily living assistance.

With the steep costs of:

  • In-home care
  • Assisted living accommodations
  • Skilled nursing facilities

it’s crucial to have a strategy if you want to safeguard your savings.

Traditionally, standalone Long-Term Care (LTC) insurance has been the go-to solution for most retirees looking to cover future care expenses. But these days, hybrid policies that combine life insurance and long-term care benefits are also gaining massive popularity.

It’s important to plan for your future care needs. At Brogan Financial, we make sure you fully understand all your options before deciding between a self-funded approach, Traditional LTC policies, and Hybrid Life Insurance/LTC products.

In this article, we’ll outline the key pros and cons of each approach to help you make an informed decision, given your specific situation and needs.

Traditional Long-Term Care Insurance

Standalone long-term care insurance has been around for decades. With this type of policy, you pay regular premiums in exchange for coverage that will pay out benefits if you eventually require care due to illness, injury, or age-related decline.

These policies can cover costs for in-home care, adult day services, assisted living facilities, and nursing home care. Payouts are usually based on a daily or monthly dollar limit.

A key advantage of traditional LTC insurance is that premiums may be deductible as medical expenses once you hit a certain age threshold. Traditional policies also tend to have more flexible benefit triggers – you can access benefits even if you just require assistance with a few daily living activities.

However, traditional LTC premiums may increase over time as insurers adjust rates to account for longer lifespans. These policies also run the risk of lapsing if you can no longer afford payments.

Hybrid Life/LTC Policies

Hybrid life insurance/LTC policies have emerged in recent years as an alternative way to plan for long-term care. With these combo products, the policy has a death benefit that pays to your beneficiaries when you pass away.

But there is also a “living benefit” that allows you to access a portion of the death benefit early if you have a qualifying need for long-term care.

Hybrid policies can provide more premium stability compared to traditional LTC insurance. Many also offer various customization options in terms of benefit amounts and triggers. And you can rest assured knowing your loved ones will receive a payout when you die, even if you tap some of the early benefits while alive.

The drawbacks of hybrid policies relate to less flexibility on when you can access benefits, more strict doctor certification requirements, and the fact that payouts may reduce what your beneficiaries ultimately receive.

Finding the Right Solution: Traditional LTC Insurance vs. Hybrid LTC Life Policies

1.   Consider Your Age and Health

When weighing different long-term care insurance options, your age, and current health status are important factors. Traditional LTC policies tend to have more age restrictions, while hybrid policies may be available even into your 70s and 80s, depending on your health history.

If you want to get coverage at an older age, a hybrid policy may be your only choice.

2.   Evaluate Your Risk Factors

In addition to age, take a close look at your family history and lifestyle to realistically gauge your future care needs. Those with chronic conditions or a genetic predisposition to illness may benefit from earlier, more robust LTC planning.

For relatively healthy individuals, a hybrid policy with growth potential may suffice.

3.   Compare Potential Benefits

The type and amount of benefits paid out can differ greatly between standalone LTC products and hybrid life/LTC policies. Generally, traditional LTC plans offer wider-ranging benefits that are easier to access.

But hybrid plans provide more certainty that either you or your heirs will receive a payout. Project your potential care costs and model out your legacy goals.

4.   Discuss Options with a Professional

Identifying the most suitable match comes down to closely analyzing your unique financial situation and priorities.

An experienced financial adviser can illustrate how different plans might perform and coordinate with your other retirement planning.

Work with Us

At Brogan Financial, our dedicated specialists take the time to explain how these policies work and illustrate projections over short- and long-term time frames.

Book a call today and take control of your future care needs so that you get all the help you need in your retirement years.

P.S. – don’t forget to tune into “More Living with Jim Brogan” at NewsTalk 98.7 every Saturday at 9 to get all the updates on the current financial climate.