Plymouth Insurance Agent | Long Term Care: Hybrid vs Traditional

Long term care insurance is one of the most important types of insurance for those who are becoming older and looking at retirement. Generally and generally the best time to get long term care insurance is before you turn 50 years old because after that the expenses increase much more quickly. The younger you can get long term care insurance the lower the price you will pay will be. Now as your Plymouth Insurance Agent,  let me break down the two most popular types of long term care options that exist in today’s market.

Traditional long term care policies are the first type. These policies have slowly been declining over the years because of the introduction of the hybrid long term care policies. These hybrid policies have a life insurance component coupled with long term care coverage which delivers a unique and higher quality type of policy. For example, with traditional long term care, there’s no death benefit. It’s a type of use it or lose it policy. Sort of the same way that an auto insurance policy would work. So you pay for the premiums every month and you have the protection, but as soon as it expires and the policy is no longer in effect, you no longer have any benefits. You lose any premium if you’re to not use the policy for long term care. A, there’s only a pay as you go option. As your Plymouth insurance agent, is also important to explain that with traditional long term care the premiums will increase over time because as you’re becoming older on the traditional long term care policies, the company recognizes that and says, okay, as you’re getting older, you’re more likely going to have some sort of long term care problems so we are going to increase your rates to account for the fact that your risk is becoming higher.

Also with the long term care traditional policies, you find that in the hybrid policies that are life insurance plus long term care, they have the exact same trigger for issuing out benefits, which is the inability to perform two out of the six daily activities of living. Or if someone is to have a cognitive impairment such as dementia and dementia or all time Alzheimer’s disease. Many people do not know that there is a second option for long term care, and now your Plymouth insurance agent will explain it.

Let’s take a second to focus on the hybrid long term care policies. So like I had explained earlier earlier, the hybrid policies are a life insurance policy plus long term care benefits, and the advantage of this, and the reason why they’ve become so popular is because opposed to the traditional type of long term care, these types of policies do have a death benefit payout if the long term care portion of the policy is not used. So this can be viewed as a type of return of premium. Whereas on the traditional long term care side, you pay as you go. If you don’t use the policy, you don’t get anything in return for this policy with the hybrid section which has the life insurance plus the long term care, the return of premium can come when the person insured passes away and the death benefit is paid out. Also, the hybrid policies do have a single premium payment option which can benefit some clients.

Now this will be usually a larger sum of money, but it will just be a one-time payment and then they’ll have guaranteed amount of benefits at a certain level for a certain number of years and some policies actually will continue. For a lifetime, so you’ll have x amount of dollars to spend per month per person or for that individual for their lifetime in a long term care facility. Also with hybrid policies, the premiums are a fixed rate. Again, you won’t see the increasing premiums that you see in a traditional long term care policy and like we stated before, the trigger for the hybrid policies for the issuing of long term care benefits is exactly the same as the traditional long term care policies. It’s either unable to perform two out of the six activities of daily living or having a cognitive impairment such as dimension or Alzheimer’s.

Kind of because of the added benefits that a hybrid policy offers with the death benefit, because it’s part of a life insurance policy, it really makes sense to look into these policies because of the traditional type of long term care is sort of becoming an outdated type of long term care. However it with any insurance, one type of policy is not a one size fits all for everyone. So there are circumstances where our traditional long term care policy is the best option. However, in many cases, the hybrid policies are just an overall better product, has a technical return of premium because it has a death benefit, has multiple options of paying, and the premium rates stay the same while the whole time the payout of the benefits for long term care is exactly the same and there’s no difference of when you will get the benefits paid out versus a traditional long term care policy.

The next big question your Plymouth insurance agent will answer is what are the key factors for decision making when it comes to buying long term care? The first one is always going to be your budget. How much can you afford to spend on long term care insurance? How much do you want to pay monthly or do you want to do a single premium payment option? It’s sort of up to each person to decide based on their finances. Also, how much income do you want to get from your long term care or how much do you think you will need? Now sort of the suggestion is to really plan for the worst and in that have coverage if you need it for larger amounts. So based on studies for Minnesota in 2018 the different categories of long term care, adult day care or adult day health care is around $1,800 for a month. Home health care is around $5,500 per month and assisted living facility is $4,000 per month and a full on nursing home care with a semiprivate room is $9,000 and a nursing home care with a private room is around $10,200 so those are some of the numbers that you may have to look at and decide as the purchaser of the insurance and based on your budget how much you want to purchase and also for how long of a term you want to purchase it.

And that way you’ll have a good idea of first year budget and how much you can spend, how much costs do you think you’ll be able to pay for yourself and how much you will need the long term care policy to pay. And then also how long you want the policy benefits to be paid up. The studies also show that most people will use learning long term care for two to four years. That may mean you’re in an assisted living facility to recover or have home health care to recover for that between two to four years. Some people do require a nursing home for over that amount of years if there’s things such as dementia or some other sort of cognitive impairment going on. But that is again, something that you need to look at with your family and based on your budget and decide specifically for yourself what you want to have for coverage based on national studies.

As your Plymouth insurance agent, it is important that we state that these numbers are based on real studies for costs of long term care. Traditional long term care policies average a premium costs of about $2,700 per year, and typically the terms include a daily benefit of $160 maximum for any sort of long term care coverage. And typically the length of coverage lasts between three and four years. Again, there’s no return of premium on these policies when it comes to hybrid policies, which is the life insurance portion plus long term care portion. There’s a couple types of policies. Generally you’ll see the use of a universal life or guaranteed universal life product with long term care riders. So the rider is added and you pay a monthly payment in addition to those or it’s included in the plan as part of the premium already. So part of the policy pays for the long term care portion and the other portion pays for the life insurance portion, which is a death benefit. Generally these policies though are more heavily focused on the long term care product.

If you are paying the premium and addition for the long term care services, so you want to find a policy specifically that’s going to focus on long term care and not just be a life insurance policy with a little bit of long term care added in there. You want a straw long term care benefit with it just being supported by a life insurance policy. So you have that added minimum risk of the death benefit payout, which is the technical term of re return of premium and that gives it the advantage as the hybrid policy. Also with hybrid policies. There are some companies, companies that offer what’s called a link to benefit product, and this is a joint policy option for married couples. So you can pay either a monthly or a single payment option and it pays for the payment of long term care for both individuals. And many of them have a lifetime benefit continuation option, meaning that you would get the benefits of the long term care, whatever monthly amount that your premium pays for for the length of your life. So if you were to go into a nursing home indefinitely at a, at any age, you would be paid per month for your entire life. The benefits that were stated in the plan, regardless of how long you were in the nursing home or in whatever facility it may be, no, almost all life insurance policies also have a cash surrender option. So once you’ve paid in, you can cancel the policy and surrender the cash option out and you’ll get a return of whatever you have paid in for your premium. Your Plymouth insurance agent understands how to look at your situation and give you the proper advice when looking for Long term care insurance.

So it’s really up to each person to really dive into their unique situation and find out exactly what they need. However, in most cases, the hybrid policies are going to be less risky for the individual, while still offering very, very strong long term care benefits that are competitive with a traditional long term care. Policies that have true have been more dominant in the past, but now with these hybrid policies have been slowly dwindling because of the power of the life insurance and long term care combination. For more information or to book an appointment with your Plymouth insurance agent , Envizion Insurance contact us at 612-354-6496 or visit our website and fill out our contact us form!