As of January 1, 2024, participants in the Federal Long-Term Care Insurance Program (FLTCIP) are facing another round of premium increases, adding to the financial burden triggered by previous hikes in 2009 and 2016. These developments have led policyholders to grapple with the dilemma of paying more for reduced coverage.
This predicament is not unique to FLTCIP; even in the private sector, Long-Term Care (LTC) insurance premiums are on the rise. The influx of Baby Boomers into their later years has inflated the costs associated with non-medical, long-term care, particularly in nursing homes.
Drawbacks of Conventional LTC Insurance: Use It or Lose It
The relentless escalation of premiums for traditional LTC insurance is a primary factor contributing to the low uptake, with only 7% of individuals over 50 opting for LTC coverage. Despite the nearly 70% likelihood of requiring some form of LTC services at age 65, many seniors are hesitant to invest in expensive insurance they might never use. This is a significant drawback of FLTCIP and traditional LTC coverage – if unused, all the accumulated premiums over the years are forfeited. Fortunately, alternatives exist.
Exploring Hybrid Life Insurance
Hybrid life insurance represents a permanent life coverage option that not only caters to long-term care expenses but also includes a death benefit for beneficiaries upon the policyholder’s demise. Various types of hybrid insurance offer LTC coverage:
“If you find you don’t require LTC coverage, a linked-benefit policy will provide a death benefit to your chosen beneficiary.”
Linked Benefit Insurance: In contrast to standalone LTC policies, linked benefit insurance is a genuine hybrid that intertwines life insurance with long-term care coverage. Typically providing five times the coverage of total premiums for long-term care services, these policies offer a safety net. If the need for LTC coverage does not arise, a linked-benefit policy ensures a death benefit is paid to the beneficiary.
Life Insurance With a Long-Term Care Rider: Most life insurance policies can accommodate different riders. While adding a Long-Term Care rider to a permanent life insurance policy may not match the coverage provided by hybrid policies or traditional LTC insurance, it remains a viable option.
For further insights into these insurance products and more, consider consulting with an FRC® trained advisor.
