What alternatives are there to traditional long-term care policies?

Yesterday, we discussed how many Americans are opting not to purchase long-term care insurance owing to their perhaps unfounded fears about insurer insolvency and cost, and how this reality becomes highly unnerving given that statistics show that roughly 75 percent of people who live to 65 will need some type of care.

We also started discussing, however, how insurers have helped address some of these consumer concerns by offering so-called hybrid policies that promise long-term care at lower prices.

What is a hybrid policy?

A hybrid policy is a blend of long-term care insurance and life insurance, which allows the policyholder to draw down against the death benefit — up to a limit — to cover the cost of nursing home or in-home care.

By way of example, a $500,000 hybrid policy could enable the insured to take out $200,000 to cover long-term care costs.

Is a hybrid policy worth it?

Experts indicate that while they are a far cry from the very first long-term care policies, which offered unlimited payments and low annual inflation adjustments, these hybrid policies nevertheless do provide value at more reasonable rates.

However, they also point out that careful attention should be paid as to whether the amount that can be taken out to cover long-term care costs under the policy is adequate.

For example, men have been found to need an average of three to four years of care, such that a policy like the one outlined above — with $200,000 available — may actually be insufficient.

What should a person do?   

This is ultimately a question that only you, the consumer, can answer. Nevertheless, it shouldn’t be overlooked that the consensus among experts is that having long-term care insurance — regardless of the policy type — is far better than not having it.

Source: The New York Times, “Combine long-term care with life insurance? Do the numbers first,” Paul Sullivan, Dec. 9, 2016