Should a Couple in Their 60s Buy a $15K Hybrid Life Insurance Policy?

Dear Wealth Wise: My husband and I are 65 and 66, respectively, and retired. Our financial adviser suggested a $250K life insurance policy for each of us that could also cover nursing home care. The total cost would be about $15K a year, or around $7.5K for each. Is this a good rate or even a smart idea at our age? They would take the money directly out of our retirement fund and we would be paying tax on the amount withdrawn. We also have two adult children, and we are trying to figure out the best route to minimize their taxes once we pass. — Policy Perplexed

Dear Policy Perplexed: Long-term care costs are hitting retirees hard. CareScout puts the average annual cost of assisted living in 2026 at $82,482, while a shared nursing home room costs $118,424. Even well-off retirees can struggle to cover these expenses, especially when care is needed for multiple years. That’s why some financial experts recommend long-term care insurance.

While a pair of $259K hybrid insurance policies sounds comprehensive, the $15,000 annual premium is a heavy lift. Is it worth paying? Here’s what our experts have to say.

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Is the $7,500 cost per person a deal-breaker?

Unfortunately, the later in life you apply for long-term care insurance, the more expensive your premiums are likely to be.

Sonja Breeding, CFP, CCFC, and Senior Vice President, Wealth Management at Rebalance, says, "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.”

As Breeding explains, it’s one thing to pay $7,500 a year per person for 10 years. It’s another thing to pay $7,500 a year for 20 or more.

Nicholle Overkamp, MBA, ChFC, CDFA, Founder and CEO of Wilcox Financial Group, isn’t necessarily put off by the rate either. But, she says, "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?'”

Given our couple’s age, Overkamp says she’d be cautious about committing $15,000 annually to new insurance policies without understanding the couple's complete financial picture, including their existing assets and financial goals.

Does our couple need long-term care insurance?

Since we don’t know how wealthy our couple is, it’s hard to know whether they need long-term care insurance or whether they’re in a position to self-fund it.

"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," Overkamp says.

"Insurance is about transferring risk,” she continues. “If they can absorb that risk without jeopardizing their financial security, maintaining control of those assets could be a better strategy."

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. If either one has pre-existing conditions, they could be denied coverage or face steep premium surcharges.

What’s the actual benefit?

Another missing piece of the puzzle is what the proposed insurance policy would actually cover.

Before committing, our couple needs to look past the $250,000 death benefit per person and evaluate the care payout details, Breeding says.

"The most important missing piece is the long-term care benefit itself,” Breeding says. “Let's assume this is a standard hybrid life and long-term care policy. A $250,000 death benefit often pays around 2% per month for care, or about $5,000 a month for roughly four years. Many policies also include an extension rider that continues payments for another two to four years after the death benefit is used up, which can bring the total care benefit to $500,000 or more per person.”

But Breeding’s assumptions are just that. Our couple needs to see exactly what coverage they’ll have for long-term care, especially if the policy's main purpose is to pay for that rather than provide a death benefit for heirs.

Understand the hidden costs of funding insurance premiums

Our experts both caution that withdrawing funds from pre-tax retirement accounts to pay for insurance premiums creates hidden tax drags and missed growth opportunities.

"The proposed premiums would be funded through retirement account withdrawals, potentially creating additional taxable income, increasing Medicare premiums, and reducing invested retirement assets," Overkamp says.

"Over 20 years, that's $300,000 in premiums alone, assuming payments continue that long. That doesn't include the income taxes or potential investment growth they're giving up. Before making this commitment, I would want to see an analysis of the actual after-tax cost and what those dollars could accomplish elsewhere."

Breeding agrees.

"Paying premiums from a pre-tax retirement account makes the policy more expensive than it looks,” she says. "To net $15,000 for premiums in a 22% bracket, they'd need to withdraw more than $19,000. If they have cash or a taxable account, that's usually a better source."

Tax-efficient wealth transfer strategies

Our couple wants to ensure their needs are met while minimizing taxes for their heirs. Breeding says that, given that goal, a long-term care policy with a death benefit could make sense, provided the terms of the policy work for our couple.

"There's actually a silver lining here." Breeding explains that without the life insurance policy, "their kids would inherit an IRA and have to pay income tax on it within 10 years, likely during their peak earning years. Using IRA dollars to buy a tax-free death benefit converts taxable money into tax-free money for the next generation."

That said, Breeding points out that Roth conversions "accomplish something similar and are worth comparing" before buying the insurance policy.

They should keep in mind that federal estate taxes only hit ultra-high-net-worth households (currently over $15 million for an individual or $30 million for a married couple). That said, if they live in one of the 17 states (plus Washington, DC) that levies an estate or inheritance tax, that should affect their planning too.

Key questions to ask before buying the insurance

Whether a hybrid life and long-term care policy makes sense for our couple depends on a lot of specifics. To help them decide, Breeding suggests that they ask their adviser these four questions:

1. What’s the monthly care benefit, and is there inflation protection?

2. Are the premiums guaranteed, and for how many years are they paid?

3. Is there a joint policy option with shared benefits that might cost less?

4. Is there any return of premium if we change our minds?

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.

Finally, Breeding explains, these types of insurance policies typically pay a commission, so our couple should ask point blank how their adviser is compensated for selling them one. And if they’re inclined to buy the policy, Breeding says, “A second opinion from a fee-only fiduciary is worth getting.”

Read More

• Shopping for Long-Term Care Insurance at Age 50, 55, 60 and 65? What You Need to Know
• Average Cost of Healthcare by Age and US State
• We Are 63 With $5.7 Million. My Wife Wants to Buy Long-Term Care Insurance, but I Want to Self-Insure. Who Is Right?