Types of Long-Term Care Insurance

What Long-Term Care Options Do You Have?

There are several options when it comes to buying insurance to cover the cost of future long-term care. Although the coverage details and amounts will vary according to your needs and preferences, long-term care insurance policies can generally be broken down into three types: traditional, hybrid and rider.

Given that most adults will need some form of long-term care at least once after they turn 65, and that the average use of long-term care support lasts three years, planning now can save you in the long run. 

You can purchase long-term care coverage from various insurance providers. 

With multiple types of long-term care insurance available in the marketplace, it is important that you discuss and compare your options with an independent insurance professional to find the right policy for you.

Daniel J. Adams, MBA, CFP®, CLU®Founder and President of CEG Life Insurance Services

As the founder of CEG Life Insurance Services, Daniel J. Adams has extensive experience with life and health insurance products. Daniel assists clients in building a secure financial future as a Certified Financial Planner™ professional and independent insurance agent. He also trains new agents and advises other financial professionals.

Traditional

Traditional long-term care insurance is a straightforward, standalone policy covering only the expenses of long-term care services and support. A traditional policy allows you to choose how much coverage you think you’ll need, how long you want it to last and the length of your waiting period before coverage kicks in. 

You’ll pay an annual premium, usually for life, but the details of your policy may differ. The exact costs will vary depending on your circumstances and your provider. It’s important to note that this type of policy is increasingly hard to find. The number of insurers offering standalone policies dropped from over 100 down to a dozen, according to the National Association of Insurance Commissioners (NAIC).

Hybrid

Hybrid long-term care policies combine the coverage for long-term care expenses with wider life insurance benefits. They’re sometimes called linked benefit policies. In addition to covering your long-term care expenses, a hybrid policy also accrues a cash value. You can use that value to pay for long-term care expenses, but if you don’t need or use all of it, you can pass a death benefit along to your beneficiaries.

Premiums are usually higher for hybrid than for traditional policies, because of the death benefit. The exact cost will depend on the type of coverage and provider you select.

Long-Term Care Riders

An insurance rider amends your policy to better suit your needs. In this case, a long-term care rider revises your existing permanent life insurance policy, so you can use a percentage of your death benefit to pay for long-term care. 

Adding a long-term care insurance rider usually increases the price of your premium. The percentage and amount you can access will vary depending on the policy and provider you choose.

Comparing Types of Long-Term Care Insurance

When it comes to buying long-term care insurance, you need to make an informed decision about which option is right for you. When looking for a policy that suits you best, you’ll want to compare the terms and amount of coverage, the ease of access to benefits, the waiting period and the cost.

The younger you are when you buy your policy, the lower your premiums will be (though you’ll pay them for longer). Gender is also a factor. Premiums are more expensive for women because, on average, women live longer than men and need more long-term care. Your general health also affects your premium price. If there’s disease or poor health in your life or family health history, your premiums will likely be more expensive.

Each insurance provider is different. Some might offer a discount if you pay for your coverage in a single lump sum. Another might lower the price of combined coverage for couples. Don’t hesitate to ask an insurance professional.

Types of Long-Term Care Insurance: Pros & Cons

Which Type of Long-Term Care Insurance Is Right For You?

The specifics of your situation, like your age, gender and general health, can help you figure out what kind of long-term care coverage is best suited to your future needs.

Talk to an insurance professional about your options. The following questions might help you narrow down your choices.

Questions To Ask When Selecting LTC Insurance:

• How much coverage do you want, and for how long?
• Are you buying for yourself or as a couple?
• Do you want to solely pay for long-term care coverage, or do you want to also leave a benefit behind for your loved ones?
• Are you willing and/or able to pay in a lump sum?
• What is your personal and family health history like?
• Does one type of policy provide you with more of a tax benefit than another?

Alternatives to Long-Term Care Insurance

While insurance is an option for covering the costs of long-term care, it may not be suitable for your particular needs and situation. You might find it more financially beneficial to build savings or investments to use specifically for long-term care. You could also consider purchasing an annuity to help cover the costs. Talk to a trusted financial advisor to explore the strategies that might work best for you.