Quick look: Employee interest in hybrid long-term care and life insurance policies has increased nearly 50% in just two years. With the potential to simultaneously protect people from financial pitfalls, give access to high-quality care when they need it, and safeguard their families’ futures, this coverage could help brokers strengthen their partnerships with SMB clients looking to meet their staff’s unique needs.
Feeling like you’re ready for whatever the future holds is an invaluable feeling—and benefits brokers can help their clients achieve it. By providing a hybrid long-term care and life insurance policy, brokers can help employees prepare for future health needs, fill potential financial gaps, and prevent burdening loved ones.
Here we’ll explore what long-term care insurance is, why it’s important, and the benefits of offering an option that combines long-term care insurance and life insurance to small- and medium-sized business (SMB) clients.
What is long-term care insurance?
Long-term care insurance helps cover the costs of care for those with chronic illnesses and disabilities. Typically, long-term care aims to improve quality of life and promote independence. Long-term care includes assistance with daily activities like dressing, feeding, and using the restroom, as well as appropriate medical care. Paid professionals or unpaid caregivers can provide this care.
Most policies will reimburse policyholders for care given in a variety of settings, including:
- The patient’s home
- A nursing home
- An assisted living facility
- An adult day care center
Who needs long-term care insurance?
According to the Administration for Community Living, part of the U.S. Department of Health and Human Services, almost 70% of 65-year-old people will end up needing long-term care services. Furthermore, women typically need care for over three-and-a-half years and men for just over two years. And while roughly one-third of 65-year-olds won’t need long-term care support, 20% will require it for longer than five years as they age.
While it’s impossible to predict who will require long-term care and what kind of support they’ll need, some risk factors include the following, according to the National Institute of Aging:
- Age: As people get older, their risk typically increases.
- Gender: Women tend to live longer than men and thus are at higher risk.
- Marital status: Single people are more likely than married people to need professional long-term care.
- Lifestyle: Poor diet and exercise habits can increase risk.
- Health and family history: These factors can also raise risk levels.
Please note that meeting with your financial advisor is recommended to weigh your options and make the best long-term care and life insurance decisions.
Why is long-term care planning important?
While people may not know if or when they’ll need long-term care, planning for it well in advance is critical. Doing so can help policyholders prepare for the unknown, ease the potential financial burden associated with long-term care services, and expand care options if it ends up being needed.
Bridges the financial gap
Because long-term care services are not typically covered by health insurance, disability insurance, or Medicare, long-term care insurance is necessary to protect people’s retirement savings and ease the possible burden of caregiving on their loved ones.
Without insurance, long-term care prices can add up. For example, on average, the following types of long-term care cost the following annually:
- Nursing home: Between $93,075 to $105,850
- Homemaker services: $53,768
- Home health aide: $54,912
- Assisted living facility: $51,600
- Adult day health care: $19,240
Another financial perk of long-term care insurance? Its premiums may be federally tax deductible, and many states offer a tax deduction or credit. Consider the following long-term care insurance federal tax-deductible limits, based on age at the end of the tax year, for 2022:
- Age 40 or younger: $450
- Age 41-49: $850
- Age 50-59: $1,690
- Age 60-69: $4,510
- Age 71 and older: $5,640
Prepares people for the unpredictable
It’s impossible to know what lies in the future, and an unexpected accident, illness, or injury can occur at any time. Long-term care insurance can be incredibly useful in readying people for the unknown—but only if a policy is purchased before it’s needed. Thus, it’s recommended a person purchases a policy while they’re still in good health (the average age of purchase is 56 and 57 years old). Premiums are lower the younger you are, and those over 75 or who already have a debilitating condition likely won’t be approved.
Planning ahead for long-term care needs also provides policyholders the opportunity to browse local services and their associated costs, a less stressful and more empowering process while you are still in good health and able to make critical decisions.
Opens more doors to care
A long-term care insurance policy can provide people with more options for care, if and when it’s needed. That’s because those without insurance may need to rely on Medicaid, limiting them to choosing nursing homes that accept payments from the program. And in many states, Medicaid doesn’t pay for assisted living at all.
Comfort and choice are priorities when facing challenges that require long-term care, and having the right policy can equip policyholders with the funds they need to choose the best care for their needs.
Better together? All about combined long-term care and life insurance
For many, long-term care insurance is a must—and it can become even more of a value-add when combined with life insurance in a hybrid policy. A joint policy can allow your clients’ employees to secure both permanent life insurance and long-term care protection if needed.
In a hybrid policy, life insurance protects the policyholder’s family with money that can be used in any way in the event of their passing (i.e., paying the mortgage or rent, children’s and grandchildren’s education, retirement, family debt, final expenses, etc.)
On the other hand, long-term care kicks in if the policyholder becomes chronically ill and qualifies for the benefits. In that case, they can access a certain percentage of their life benefit per month if long-term care is needed. Generally, the long-term care benefit can pay out more than the life insurance benefit (i.e., double your life insurance benefit) if the policyholder has a continuous need for care.
Policy example: If the life insurance benefit is $50,000 and the monthly long-term care benefit is 4%, the policyholder could receive $2,000 monthly, and the total long-term care benefit is $100,000 (twice the life insurance benefit).
Another advantage of a hybrid policy is that, in some cases, policyholders may still be eligible for a death benefit payable to the beneficiary, even if long-term care benefits are used.
A hybrid policy may also be a valuable addition to brokers’ portfolios, as interest in the coverage has recently surged. According to research firm LIMRA, in 2021, more than 25% of Americans reported they were very likely to consider buying a combination policy, up from just 17% in 2019. Furthermore, millennials, the largest generation in the U.S. workforce, were the most interested, with 35% claiming it was extremely likely they would consider purchasing it.
Why the boom? LIMRA found that the top three reasons people are considering the hybrid policy are:
- Concern that long-term care costs may deplete or exceed their savings (35%)
- The belief that it’s a more economical use of their current assets (33%)
- Understanding that benefits will be paid even if they don’t incur long-term care expenses (29%)
Broaden your business by insuring for the unexpected
Life insurance and long-term care insurance are wise investments for those looking to protect their future—and recent studies paint a picture of how much people value that security. Your clients are likely looking for ways to provide stability to their employees, and as a broker, you can deepen your partnership by delivering it.
In addition to many human resources services, a professional employer organization (PEO) can help brokers offer clients an affordable, attractive benefits package, including the option for a long-term care and life insurance hybrid policy. And during a time when employees are prioritizing their benefits more than ever, a PEO like ExtensisHR can also equip you with other Fortune 500-level benefit offerings, including:
- Comprehensive medical, dental, and vision plans
- Flexible spending accounts (FSA) and health savings accounts (HSA)
- 401(k) retirement plans
- Critical illness, accident, and hospital indemnity insurance
- Employee Assistance Programs (EAP)
- And more
Peace of mind is priceless, and brokers can help clients provide it to their employees by offering a hybrid long-term care and life insurance policy. Contact ExtensisHR today to get started.