The cost of the premium is also locked in, meaning it will never go up. Furthermore, your premiums are returned to your dependents if you pass away before using the long-term care benefits. As a result, whether you utilize the policy for long-term care, death benefits, or a mix of the two, you will always get your money’s worth.
The monthly premiums for hybrid insurance tend to be higher due to the inclusion of such assurances. Yet, the total cost of a hybrid policy over the course of a lifetime may be similar to or even less than the total cost of a regular policy.
We advise looking into both classic and hybrid policies as you start your search for long-term care insurance. Being flexible in your search for a policy can help you find the greatest fit for your needs, as the costs and advantages of each may vary depending on factors such as your age, gender, and desired level of coverage.
One woman’s perspective on the pros and cons of going the hybrid route versus the traditional route. We just finished advising a 45-year-old single lady on her choices in long-term care insurance. Traditional policies cost $267 per month and would cover her until she needed long-term care, providing up to $255,000 in benefits plus 3% inflation protection (and if she never needed care, her payments would continue for life).
The monthly premium for a hybrid coverage was $692, and it would stop either when she began receiving benefits after 10 years or when the policy expired. We analyzed her predicament by contrasting various possibilities on a spreadsheet and came to the following broad conclusions:
• Under a standard policy, she’d be better off financially if she ended up requiring a lot of care in the next few years, as she’d have paid premiums for only a few years before they stopped.
This is highly improbable, though. The median age of those in need of medical assistance is 80 years old.
Roughly half of the retirees (48%) either won’t need any long-term care at all or will need just minimal assistance within their first 90 days of retirement. If she died suddenly without using much care, the hybrid plan would be preferable because her loved ones would get their money back, with interest.
• If she ends up in the other 52% of people who require some care, she probably won’t need it until she’s in her 80s. With the money she would have put toward a standard policy’s premiums, she comes out ahead with the hybrid option as well.
If the 45-year-old woman could afford the greater up-front costs associated with the hybrid, it was the clear winner in this comparison. The opposite was true for a 71-year-old married man whose package we reviewed, so he opted for the more conventional coverage.
Consult with an expert who can help you weigh the costs and benefits of various long-term care insurance plans to get a complete picture of your options.