Hybrid Long-term Care Insurance

When you pass away, a standard life insurance policy provides a death benefit to your beneficiaries. However, insurers frequently provide riders that allow the death benefit to be used for living expenses. Hybrid long-term care insurance combines a long-term care rider with a standard life insurance policy. It pays for your care if you cannot live independently.

In this post, you’ll learn everything about 

In this post, you’ll learn about everything there is to know about hybrid long-term care insurance. You don’t want to miss this comprehensive information so ensure you stick with me to the end.

What is a Hybrid Long-term Care Insurance?

A hybrid policy for long-term care combines a traditional life insurance policy with a long-term care rider. If you can’t care for yourself, you can use a portion of the death benefit to pay for professional care. Instead of your beneficiaries, your service providers, such as a nursing home or in-home care provider, get the monies.

When you die, hybrid life insurance ensures that the cost of your care will not deplete your descendants’ fortune. To qualify for the long-term care rider, you must be unable to do two of six activities. These are the six essential everyday activities:

  • Bathing
  • Eating
  • Getting dressed
  • Preserving normal bowel and urinary function
  • Using the toilet
  • Walking between two sites

Long-term care riders deduct the cost of assisted living from the death benefit. Still, it does not cover expenses generally covered by health insurance, such as doctor’s visits, medications, or operations.

What is the cost of assisted living?

Assisted care is typically not covered by insurance and might cost tens of thousands of dollars yearly. According to a survey, the annual prices of the following services are as follows:

  • Expenses for domestic help: $53,768
  • Personal care aide: $54,912
  • Adult day care: $19,240
  • $51,600 for a residential care facility
  • Cost of a semi-private room at a nursing home: $93,075
  • The expense for a private room in a care home: $105,850
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With inflation, it is projected that these expenses will grow. Between 2019 and 2020, prices increased by an average of 3.4% across almost all categories.

Using a long-term care rider comes with a caveat: just the first five years of assisted living care are covered. Medicaid, assets, or an independent long-term care insurance coverage would pay for your treatment.

Who should buy a hybrid policy for long-term care insurance?

Your financial circumstances will determine if you should purchase a hybrid long-term care insurance plan. After age 65, 69 percent of Americans will, on average, require three years of assisted care. Twenty percent will require care for more than five years.

Consider this option if you lack the finances to pay for both assisted care and an inheritance for your heirs.

How much does hybrid long-term care insurance cost?

The cost of life insurance with a long-term care rider fluctuates according to insurer, age, and other factors. In 2019, the average annual premium for a healthy 55-year-old couple was $3,050, according to an AALTCI poll. A woman aged 55 would pay $2,050 yearly, but a guy aged 55 would pay $2,700 annually.

Long-term care riders are priced as a separate insurance product irrespective of it being an addition to standard insurance. 

As age and health diminish, so does the cost of the rider. Even if you are 40 years from needing it, purchasing a hybrid policy when you are younger is prudent. Though it is uncommon, young people may unexpectedly require assisted care, and ordering early ensures the most affordable rate.

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What are the best hybrid long-term care policies?

Numerous whole life, term life, and guaranteed life insurance policies include the option to add a long-term care rider. To qualify for the rider, some insurers require you to acquire a certain amount of life insurance, often at least $100,000.

Medicaid can be used to cover the costs of long-term care.

It will cover the cost of long-term care, but you may not instantly qualify. Your income must be below a specific threshold to be eligible for Medicaid. This is often between 133 and 138 percent of the federal poverty level, and your assets cannot exceed a certain limit.

When applying for Medicaid, you must submit your five-year financial history to the Department of Social Services. This is referred to as the look-back period, which affects your eligibility for benefits. Additionally, they will analyze any assets that you have transferred out of your name during the prior five years.

Long-term care riders cover just the first five years of disability. However, if you prepare ahead, Medicaid can begin where your hybrid plan ends.

What is a Medicaid asset spend-down?

If your assets exceed the maximum eligibility barrier for Medicaid, you can “spend them down.” It will lower your net worth to meet Medicaid’s eligibility standards.

There are several ways to deplete one’s assets, some of which include:

  • Make improvements to your home or car that qualify as investments
  • Repay past-due liabilities.
  • Paying a gift tax 
  • Establish an irrevocable Medicaid trust and put assets into it.

What is a quantifiable asset?

There is a limit on countable assets for Medicaid eligibility. Medicaid asset spend-down plan may be necessary to cover the cost of care. These encompass:

  • Checking and savings accounts
  • Deposit certificates and money market accounts
  • Stocks
  • Bonds
  • Investments in properties other than your primary residence
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What are assets other than inventory?

Your Medicaid asset depletion strategy need not incorporate non-countable assets. These encompass:

  • Your automobile
  • Your primary domicile (varies by state and is based on the value of the residence)
  • Accounts for retirement include IRAs and 401(k)s (k)
  • Payment in advance for burial or cremation
  • Certain life insurance protection
  • Personal possessions

Optional insurance for long-term care

You may opt not to obtain a hybrid long-term care insurance policy. Still, there are other ways to pay for assisted living and other care expenses, each with its perks and downsides.

Independent long-term care insurance won’t reduce the death benefit of your beneficiaries, and it may offer coverage for a longer period. However, plans are far more expensive than riders for long-term care.

Self-funding your long-term care with your savings or other assets will save you money on premiums, but it might be harmful. You will lower the amount of money you may leave to your heirs. Also, you may need care for a longer period than your budget allows.

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