Hybrid Solutions Provide Enhanced Coverage for Future Care Requirements
As of January 1, 2024, participants in the Federal Long-Term Care Insurance Program (FLTCIP) are encountering yet another round of premium increases, compounding the financial strain caused by previous hikes in 2009 and 2016. These developments have left policyholders grappling with the dilemma of paying more for diminished coverage.
However, this challenge extends beyond FLTCIP, as Long-Term Care (LTC) insurance premiums in the private sector are also on the rise. The influx of Baby Boomers into their later years has driven up the costs associated with non-medical, long-term care, especially in nursing homes.
Shortcomings of Traditional LTC Insurance: Use It or Lose It
The relentless increase in premiums for conventional LTC insurance is a major factor contributing to its low uptake, with only 7% of individuals over 50 opting for LTC coverage. Despite the nearly 70% likelihood of needing some form of LTC services at age 65, many seniors hesitate to invest in costly insurance they may never use. This is a significant drawback of FLTCIP and traditional LTC coverage – if unused, all the accumulated premiums over the years are forfeited. Thankfully, alternatives are available.
Exploring Hybrid Life Insurance
Hybrid life insurance offers a solution, providing permanent life coverage that not only addresses long-term care expenses but also includes a death benefit for beneficiaries upon the policyholder’s passing. Various types of hybrid insurance offer LTC coverage:
Linked Benefit Insurance: Unlike standalone LTC policies, linked benefit insurance is a true hybrid, combining life insurance with long-term care coverage. Typically providing five times the coverage of total premiums for long-term care services, these policies offer a safety net. If the need for LTC coverage does not arise, a linked-benefit policy ensures a death benefit is paid to the beneficiary.
Life Insurance With a Long-Term Care Rider: Most life insurance policies can accommodate different riders. While adding a Long-Term Care rider to a permanent life insurance policy may not match the coverage provided by hybrid policies or traditional LTC insurance, it remains a viable option.
For further insights into these insurance products and more, consulting with an FRC® trained advisor is recommended.
