From Kiplinger · · 2m
Retirement Insurance Advice for Couples in Their 60s
Retired couple seeks advice on $15K/year hybrid life insurance policy for nursing home care.
In brief
Retired couple seeks advice on $15K/year hybrid life insurance policy for nursing home care. Retired couple should ask four questions before buying $250K hybrid life insurance policy to cover nursing home care costs. Originally reported by Kiplinger.
Retired couple's insurance question
Retired couple aged 65 and 66 asked financial adviser about $250,000 hybrid life insurance policy costing $15,000 annually.
“The total cost would be about $15K a year, or around $7.5K for each”
Long-term care costs in 2026
CareScout estimates average annual assisted living costs at $82,482 in 2026, with shared nursing home room costing $118,424.
“CareScout puts the average annual cost of assisted living in 2026 at $82,482”
Premium cost concerns
Sonja Breeding, CFP, CCFC, Senior Vice President at Rebalance, says $7,500 per person premium is reasonable but questions if it's paid for life or only for 10 years.
“At their ages, $7,500 a year per person is within a reasonable range, but I'd want to know whether that premium is paid for life or only for a set number of years, such as 10”
Alternative financial approach
Nicholle Overkamp, Founder and CEO of Wilcox Financial Group, suggests understanding the couple's complete financial picture before committing to insurance.
“My first question wouldn't be whether $7,500 per person is a good insurance rate. It would be, 'What problem are we actually trying to solve?'”
Self-funding vs insurance
Overkamp states that if the couple has enough wealth to self-fund care, insurance may not be the most efficient use of assets.
“If this couple has accumulated enough wealth to comfortably self-fund potential long-term care expenses, purchasing expensive insurance may not be the most efficient use of their assets”
Health considerations
Securing hybrid insurance requires rigorous medical underwriting, with pre-existing conditions potentially leading to denial or premium surcharges.
“We also don't know how healthy the couple is. At ages 65 and 66, securing a hybrid life and long-term-care policy requires passing rigorous medical underwriting”
Care benefit details
Breeding explains that standard hybrid policies pay around 2% per month for care, or $5,000 monthly for four years, with potential extensions.
“A $250,000 death benefit often pays around 2% per month for care, or about $5,000 a month for roughly four years”
Tax implications
Withdrawing from pre-tax retirement accounts to pay premiums creates hidden tax drags and missed growth opportunities.
“The proposed premiums would be funded through retirement account withdrawals, potentially creating additional taxable income”
Tax-efficient wealth transfer
Breeding suggests using IRA dollars to buy tax-free death benefits for heirs, avoiding income tax within 10 years.
“Without the life insurance policy, their kids would inherit an IRA and have to pay income tax on it within 10 years”
Key questions to ask
Breeding recommends four questions: monthly care benefit with inflation protection, premium guarantees, joint policy options, and return of premium.
“What's the monthly care benefit, and is there inflation protection? Are the premiums guaranteed, and for how many years are they paid? Is there a joint policy option with shared benefits that might cost less? Is there any return of premium if we change our minds?”
Alternative policy options
Couple could seek quote for traditional standalone long-term care policy, which strips out life insurance component.
“The couple could also seek a quote for a traditional, standalone long-term care policy, which strips out the life insurance component and is often cheaper”
Adviser compensation
Breeding advises asking adviser how they're compensated for selling insurance policies and seeking second opinion from fee-only fiduciary.
“A second opinion from a fee-only fiduciary is worth getting”
What happens next
Retired couple should ask adviser four specific questions before deciding on hybrid life insurance policy.
“They should ask their adviser these four questions”
The big picture
Retired couple should ask four questions before buying $250K hybrid life insurance policy to cover nursing home care costs.
