Each block is a year of care. After the waiting period the policy pays up to its daily or monthly amount, until the pool is used; what is left is yours to pay. Illustrative, not to scale.
What it is
Benefits are triggered when you cannot do two or more activities of daily living (bathing, dressing, eating, toileting, transferring, continence) or have a cognitive impairment such as dementia. The policy then pays a daily or monthly amount toward care, up to a total pool of money, after a waiting period.
Traditional long-term care policies are pay-as-you-go: premiums can rise, and if you never need care, nothing is paid out.
Hybrid policies combine life insurance or an annuity with a long-term care benefit. Premiums are usually fixed, and if care is never needed the death benefit or account value goes to your heirs. They cost more up front for that certainty.
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Who it is for
- People in their 50s and early 60s
- Premiums are based on age and health at purchase. Waiting until a diagnosis usually means being declined.
- People with assets to protect
- If paying for care yourself would consume the savings or house you wanted to pass on, insurance shifts that risk.
- People who do not want to rely on family
- Care from a spouse or adult child is real work. A policy pays for professional help so family can be family.
- Married couples
- The second spouse’s security often depends on the first spouse’s care not emptying the joint accounts.
What it is not
- It is not Medicare. Medicare pays for limited skilled nursing after a hospital stay, not for ongoing help with daily living.
- It is not Medicaid, which pays for care only after most of your assets are spent down, with limits on where and how you are cared for.
- It is not a good buy for everyone. If your assets are modest, Medicaid will likely be your safety net; if they are very large, you may simply self-insure. It makes most sense in between.
The questions we ask
- Who would care for you if you needed daily help next year, and what would that do to them?
- What would a few years of care cost where you live, and what would paying for it do to your plans?
- Is there dementia or long illness in your family history?
- Would you rather a traditional policy with lower premiums that can rise, or a hybrid with fixed premiums and something left for heirs?
- How is your health now? Underwriting is strict and earlier is easier.
- Is a spouse or partner also considering cover? Shared benefits exist.
Costs and trade-offs
A traditional policy bought in your mid-50s commonly runs a few thousand dollars a year for a meaningful benefit, and insurers can raise rates on a whole class of policyholders, which has happened. Hybrid policies are often paid as a single lump sum or over 10 years, and the premium is guaranteed but much larger.
Inflation protection is the rider that matters. Care costs rise, and a benefit fixed in today’s dollars buys much less in 25 years. It is also the rider that adds the most to the premium.
Hybrid policies can carry surrender charges, and their long-term care benefit may be funded partly by your own money. We will separate what the insurer is guaranteeing from what you are effectively prepaying.