Traditional Vs Hybrid Long Term Care Insurance
According to estimates, there is a 50% probability that a person above 65 years will need professional long-term care services for about one year which costs about $140,000 on an average. This information should make you realize the importance of purchasing long term care insurance.
Insurance companies have been selling long term care insurance products since the 1980’s. This product had peaked popularity during the 1990’s. However, in recent times, due to various reasons, long term care insurance has lost favor with both the insurance companies and the buyers.Many long-term care insurance carriers have exited the market with only a handful remaining now. This is the traditional long-term care insurance policies.
Reasons for Decreasing Popularity of Long Term Care Insurance
- Not profitable for insurance companies – The number of actual claims on long term care insurance policies was much higher than as calculated by the insurance companies. The profits became low when claims had to be paid out on policies bought many years back.
- Recent dwindling sales of policies – Decreasing sales of long term care insurance polices also compelled insurance companies to discontinue selling new policies.
- Not worth the expense – Traditional long-term care insurance policies do not pay back anything if the benefits are not used up during the lifetime of the policyholder. Many customers believe that paying the premiums over maybe, twenty-five or thirty years and not getting anything back,is not worth it.
- Very expensive for many - Long term care insurance premiums keep rising over the years. So, something which was already pricey to start with becomes unaffordable after some years.
Alternative Products to Traditional Long-Term Care Insurance
Your regular health insurance will not cover long term care costs. Medicare gives limited coverage and in order to get Medicaid benefits you have to spend down your assets to meet the eligibility. For those who want to buy some amount of long term care insurance but not the traditional one, there is the hybrid policy -combination of whole life insurance with long term care benefits.
Basically, it a whole life insurance policy which pays out a part of the death benefit as long-term care expenses when needed. If the policyholder does not need long term care, the full amount of the death benefit will go to the beneficiary. So, there is no scope of losing all the money paid as premiums if long term care is not required. This provision of long term care coverage lets you use the benefits just like a regular long-term care insurance policy. It still keeps you independent and be able to finance your care with your own money.
Another advantage of these hybrid policies is that the premiums don’t rise once they are locked in.With traditional policies, premium hikes are a major concern. However, on the downside, the hybrid polices are more expensive than the traditional policies if compared on the same factors. If you want to buy this policy, you should buy it within your early 60’s in order to get lower rates. After 65, rates increase sharply.
The hybrid long term care insurance policies are perhaps a good way to get the best of both the worlds.
More Useful Links:
Things to Know Before You Buy Long Term Care Insurance