Long-Term Care Solutions: Hybrid Life Insurance

When it comes to retirement planning, one major concern that often surfaces is long-term care. How will you fund it? What options do you have to ensure your future well-being while protecting your hard-earned assets? The world of long-term care insurance has changed drastically over the past few decades, moving away from traditional models that required ongoing premiums to newer solutions designed to provide more flexibility and security. One of these innovative solutions is hybrid long-term care insurance, particularly policies that combine life insurance with long-term care benefits.

What makes hybrid long-term care insurance so intriguing is its ability to offer dual benefits: life insurance coverage alongside long-term care protection. This means that your funds are available for care when you need them, but if you don’t end up needing long-term care, your beneficiaries will still receive the life insurance payout. In this blog, we will explore this hybrid approach, focusing specifically on products like Lincoln Financial’s MoneyGuard Fixed Advantage and how they provide solutions for securing your retirement and planning for the uncertainties of the future.

Understanding Hybrid Long-Term Care Insurance

Long-term care (LTC) is a significant expense in retirement, and traditional LTC insurance has faced criticism due to rising premiums and the risk of never using the benefits despite paying into it for years. Hybrid long-term care insurance offers an alternative by blending LTC coverage with life insurance, ensuring that the money you put into the policy isn’t lost if you never require care. Instead, the death benefit will pass on to your beneficiaries.

MoneyGuard Fixed Advantage, for instance, is a life insurance policy with a long-term care rider. The policy allows you to access the death benefit while you’re alive to cover long-term care expenses, ensuring that your retirement planning is more flexible and comprehensive. If long-term care is never needed, your heirs receive the full death benefit tax-free.

How Does Hybrid Long-Term Care Work?

Let’s break down how hybrid long-term care insurance policies, like the MoneyGuard Fixed Advantage, function. Essentially, these policies allow you to fund long-term care costs while maintaining a life insurance benefit. Unlike traditional long-term care policies, where you might pay premiums indefinitely without ever utilizing the coverage, hybrid policies ensure that your money serves more than one purpose.

We’ll walk through some of the features of the MoneyGuard Fixed Advantage as an example. To start, after a 10-year premium payment period, you no longer need to make contributions. The policy is designed so that you will have access to long-term care benefits, and if you never need to use them, your heirs still receive the death benefit.

In our scenario of a 60-year-old woman in North Carolina, the premium for her MoneyGuard Fixed Advantage policy would be $9,422 per year for 10 years. By the time she reaches age 85, she would have access to $10,469 per month for long-term care, and her heirs would still receive a death benefit of $120,000 if she passed away without using the long-term care portion.

Flexibility of Hybrid Long-Term Care Insurance

A key feature of hybrid policies is the flexibility they offer. MoneyGuard Fixed Advantage, for example, allows policyholders to receive benefits for in-home care, assisted living, or nursing home care without any elimination period. This is a stark difference from traditional LTC policies, which often require a 90- or 120-day waiting period before benefits kick in. With a hybrid policy, once you qualify by proving that you require assistance with two out of six ADLs (activities of daily living), such as bathing or dressing, you can start receiving benefits immediately.

Additionally, the policy covers a wide array of services, including caregiver training and respite care, which provides relief for family members who are caring for a loved one. The flexibility to use the long-term care benefit as needed, whether for professional services or family caregiving, makes hybrid policies especially attractive.

Guaranteed Benefits and Inflation Protection

One of the common concerns with retirement planning is how inflation will erode the value of your savings over time. Hybrid long-term care policies address this by providing benefits that grow over time. The MoneyGuard Fixed Advantage policy we have been discussing grows at a compounded rate of 3%, meaning that by age 85, the long-term care benefit increases to over $10,000 per month.

This built-in inflation protection ensures that your long-term care benefits keep pace with rising healthcare costs, making these policies a more secure investment for your retirement. Furthermore, all long-term care benefits paid out from the policy are income tax-free, providing an additional financial advantage in retirement planning.

Legacy Protection: Leaving a Meaningful Inheritance

One of the major advantages of hybrid long-term care insurance is the legacy protection it offers. Traditional long-term care insurance can feel like a gamble—if you never use the coverage, your premiums are lost. Hybrid policies eliminate this worry by ensuring that if you don’t use the long-term care benefit, your heirs still receive a death benefit.

In our example, if the 60-year-old woman with a MoneyGuard Fixed Advantage policy doesn’t require long-term care, her heirs will receive $120,000 upon her death, ensuring that the money she invested in her policy benefits her family. This dual-purpose feature makes hybrid long-term care insurance a versatile tool for retirement planning, as it provides coverage for long-term care if you need it, and legacy protection if you don’t.

Comparing Hybrid Long-Term Care Insurance to Traditional LTC Policies

While hybrid policies have numerous benefits, it’s important to understand how they differ from traditional long-term care insurance. Traditional policies may offer unlimited benefits for long-term care, but they typically come with escalating premiums and the risk of paying into a policy for years without ever using it. Hybrid policies offer a fixed premium schedule, meaning you know exactly what you’re paying for, and you’re guaranteed either long-term care benefits or a life insurance payout.

The downside is that hybrid policies generally have a cap on the long-term care benefit, whereas some traditional policies offer unlimited coverage. However, many retirees find that a hybrid policy’s fixed premiums and dual benefits outweigh the potential for unlimited long-term care coverage, especially when paired with other retirement income sources.

Who Should Consider Hybrid Long-Term Care Insurance?

Hybrid long-term care insurance is not a one-size-fits-all solution, but it can be an excellent fit for those who want to protect themselves from the high costs of long-term care without the risks associated with traditional policies. It is particularly well-suited for individuals who want to:

• Ensure they won’t lose the money they invest in a long-term care policy.
• Have flexibility in how and where they receive care, whether at home or in a facility.
• Protect their estate and leave a legacy for their heirs.
• Benefit from a policy that combines life insurance and long-term care coverage.

If any of these factors are important to you, hybrid long-term care insurance could be a valuable component of your overall retirement plan.

Next Steps: Securing Your Retirement with Hybrid Long-Term Care

As you approach retirement, it’s critical to evaluate all of your options when it comes to long-term care. Hybrid long-term care insurance can offer a flexible, guaranteed solution that helps you secure your retirement while protecting your legacy. These policies ensure that your long-term care needs are covered while allowing you to leave a meaningful inheritance if you don’t use the coverage.

The discussion on this topic may have raised some questions. You can schedule a 15 minute call to start finding some answers. If we can’t answer all your questions in 15 minutes, we can certainly help guide you to some next steps.

Schedule your complimentary call with us to learn more about Long-Term Care Solutions: Hybrid Life Insurance.