News and Commentary

It May be Time to Start Thinking About a Hybrid Long-Term Care Insurance Policy by Scott Montgomery

One of the greatest risks to your retirement savings is your longevity. The longer you live, the more likely you will develop a chronic medical condition or disability that can impair your ability to take care of yourselves later in life. Without proper planning and saving for these circumstances, it is possible that the rising costs of care will erode your hard-earned retirement savings.

To help you and your family prepare and pay for the health care services you may require in the future, you should consider a range of planning options, including traditional long-term care (LTC) insurance on its own or as a rider to a life insurance policy or annuity investment.

First, the facts.

Neither regular health insurance nor Medicare will cover the costs of long-term care. Should you require an aide to help you perform basic living activities in the comfort of your home, such as bathing, eating, dressing and using the toilet, you can expect to pay as much as $27 per hour. According to insurer Genworth, the national average bill for a home-health aide in 2019 was $4,385 a month, or $52,624 per year. Seniors needing additional care, including meal preparation and medical-monitoring services, may be required to move out of their homes to live in assisted living communities, which in 2019 had an annual median cost of $48,612. On the far end of the spectrum of care, the national annual average for a semiprivate room in a nursing home with round-the-clock services in 2019 was $90,155, or more than $102,000 for a private room.

The burden of carrying these costs could be catastrophic to you during your retirement years, when you are not earning a salary and when you also have obligations to care and provide for an aging spouse and/or other family members.

Long-term care insurance has been an efficient tool to help past generations begin paying for a significant amount of their future care costs during their prime earning years through annual, quarterly or monthly policy premiums. Policy choices can be made simply based on the size of your budget and level of care you expect to need. However, one of the biggest concerns about these policies has been that they do not have any cash value. Therefore, if a policyholder does not actually require or use LTC services later in life, they cannot receive a refund of the premiums they paid or pass the residual cash value of their policies to a surviving spouse or other heirs at the time of their death.

To help accommodate families’ needs, insurance companies have created hybrid LTC policies that combine long-term-care coverage with either a life insurance policy or annuity benefit. With these policies, you may be entitled to receive a refund for a portion of your premium payments if you decide to cancel the policy. Hybrid policies with a life insurance rider can pay death benefits to your beneficiaries upon your death. Any costs used to pay for long-term care services would reduce the amount of the death benefit.

Alternatively, a long-term care annuity will invest your LTC policy premiums to grow tax-free at a fixed rate of return for you to use to pay for qualifying LTC expenses. The surrender value of your investment at the time of your death may be passed on to your surviving beneficiaries.

One other distinction of hybrid policies is that they require either one lump-sum payment upfront or smaller installment payments over a specific period of time. However, the premium you agree to pay from the onset is locked in place for the remainder of your lifetime, unlike premiums paid for a traditional LTC policy, which will continue until you file a claim and potentially increase as you get older.

For tax purposes, because hybrid LTC policies have a cash value, the premiums you pay will not qualify as tax-deductible medical expenses, which may be the case with traditional LTC plans. Yet, it is important to remember that the money you pay to purchase a hybrid policy is not only refundable, but it also has the potential to grow and pay out benefits that exceed your initial investment amount.

There should be no question of “if” you should start planning now for your future healthcare needs – whether you need a home-health aid to help you temporarily after a fall or surgery, or you need more permanent long-term care. The decision of which type of LTC plan will work best for you should be considered under the guidance of professional financial advisors who can help you match the best product to your specific budget, needs and goals.

About the Author: Scott Montgomery is a director with Provenance Wealth Advisors, an Independent Registered Investment Advisor affiliated with Berkowitz Pollack Brant Advisors and Accountants, and a registered representative with Raymond James Financial Services.  For more information, call (954) 712-8888 or email


Provenance Wealth Advisors, 515 E. Las Olas Blvd., Ft. Lauderdale, FL 33301 (954) 712-8888.

Scott Montgomery is a registered representative of and offers securities through Raymond James Financial Services, Inc., Member FINRA/SIPC.


Raymond James is not affiliated with and does not endorse the opinions or services of Berkowitz Pollack Brant Advisors and Accountants. PWA is not a registered broker/dealer and is independent of Raymond James Financial Services. Investment Advisory Services offered through Raymond James Financial Services Advisors, Inc., and Provenance Wealth Advisors. This material is provided for information purposes only and is not a complete description, nor is it a recommendation. Any opinions are those of the advisors of PWA and not necessarily those of Raymond James. The information contained in this report does not purport to be a complete description of the developments referred to in this material. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. You should discuss any tax or legal matters with the appropriate professional. Prior to making an investment decision, please consult with your financial advisor about your individual situation.

Life insurance and long-term care insurance policies have exclusions and/or limitations. The cost and availability of life insurance and long-term care insurance depends on factors such as age, health, and the type and amount of insurance purchased. As with most financial decisions, there are expenses associated with the purchase of life insurance and long-term care insurance. Life insurance policies commonly have mortality and expense charges. In addition, if a policy is surrendered prematurely, there may be surrender charges and income tax implications. Guarantees are based on the claims paying ability of the insurance company.