Some, but not all, policies cover at-home care or assisted living in addition to nursing facility care. Make sure you understand both the benefits and limitations of each policy you’re thinking about purchasing.
Only if you also require whole life insurance does hybrid LTC insurance make sense.
While hybrid LTC insurance may appear appealing—after all, you won’t lose all of your premium money if you don’t need long-term care—it is typically much more expensive than traditional LTC insurance. If you weren’t considering whole life insurance in the first place, or if you value money more during your lifetime than at death, you should think carefully about whether hybrid LTC insurance is right for you.
The Chances of a Long Nursing Home Stay
While it is true that many people will require long-term care as they age (and insurance agents frequently emphasize this fact), the question you should really be asking when considering LTC insurance is: Will you require so much care that the money you spend on premiums over time will be worth it?
Also, would it be better to simply save that money?
Consider the following scenario:
Naomi, who is 55 years old, purchases a traditional LTC insurance policy. For up to three years, the policy pays benefits of $200 per day for nursing home care and $100 per day for home care. This policy costs Naomi $300 per month.
Naomi requires significant long-term care, beginning with one year of home care at the age of 75, followed by one year of nursing home care. This means she paid $72,000 in premiums over the course of 20 years and received $108,000 in benefits ($36,000 for a year of home care plus $72,000 for a year of nursing home care).
This appears to be a good trade-off for Mary, but consider whether she could have done better by simply investing her $300 monthly premiums in safe investments over the course of those 20 years.
Assuming a 5% return on investment, she would have been better off “self-insuring,” or putting money aside in case she needed long-term care. (For the sake of simplicity, this example ignores both rising care costs and rising premiums.)
Long-term care insurance may be a good idea for some people, particularly those with a high income and significant assets. This is especially true if long-term care insurance is seen as a safety net rather than a financial investment. Even those who can afford it should be aware of the wide range of policies and services available.
