Lots of companies are making limited-time offers for hybrid policies, and employees have questions.
Got a question about the mechanics of investing, how it fits into your overall financial plan, and what strategies can help you make the most out of your money? You can write me at [email protected]. I keep getting these emails from my company about a new benefit they are offering that is a combination of life insurance and long-term-care insurance. I really want to get long-term-care insurance, but I don’t know if this is a good deal or not.
In the past few years, the COVID-19 pandemic shifted people’s thinking about future healthcare costs, and legislation is pending across the country — and is already in force in Washington state — to mandate that companies provide this coverage in order to alleviate the burden on Medicare and Medicaid. On top of all that, the economy has changed, and now interest rates are high, along with inflation, which is changing the pricing dynamic.
Policies range in price and vary by the age of the enrolled person, but a typical one would cost about $3,700 per year for a woman in her early 50s, with premiums rising over the life of the plan or if you choose to add to the death benefit over time. That would get you up to a $400,000 long-term care benefit, paid at $8,000 a month for 50 months, and a $200,000 death benefit.
“Inflation is a big deal, so you just have to take that into consideration,” says Howard Sharfman, senior managing director at NFP, an insurance brokerage. The alternative is self-funding, which makes sense mathematically but perhaps not behaviorally. Take the pricing example of the 50-year-old paying $3,700 a year for 30 years, not counting premium increases. If you took that amount and invested it yearly, you’d have $153,000 after 20 years at 7% returns. That’s nearly the policy life insurance benefit. Add another 10 years to that — presuming you wouldn’t need long-term care until you hit 80 — and you’d have a nest egg of nearly $350,000.
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