For most people, it’s not whether they will need long-term care (LTC) but how they will pay for it.
According to a UBS LTC Study, about 85% of households with a 65-year-old couple will use some form of long-term care over their lifetime. The median cost for the care of a couple is $323,000 during their lifetime, according to the study, with 19% of families incurring expenses over $1 million.
In the Washington, D.C., area, the monthly cost for home care services is $6,873; for assisted living, it’s nearly $9,000 for a private one-bedroom (and can run even more depending on the facility); and it’s nearly $16,000 for a private room in a nursing home, according to Genworth and CareScout.
High-net-worth individuals may be able to self-insure these costs, but that doesn’t make it the most viable or efficient choice.
Why LTC Coverage Is an Important Wealth Management Strategy
Long-term care can impact wealth faster than most people anticipate. Costs typically extend over years, and while you might be able to pay them out of pocket, doing so can interrupt other financial priorities, such as retirement planning, gifting strategies, charitable commitments or portfolio performance.
Long-term care insurance allows high-net-worth families to preserve liquidity, maintain control over assets, and protect the wealth you’ve built for future generations. Instead of liquidating investments or diverting cash flow to cover care expenses, LTC coverage acts as a financial buffer, providing funding when and where it’s needed most.
A Smart Choice: Hybrid LTC Policies
One of the most popular options among high-net-worth clients is a hybrid policy that bundles long-term care and life insurance. Unlike a stand-alone LTC policy, which someone might pay into for years but never use, a hybrid policy allows you to either use the long-term care coverage or receive a death benefit. The premiums you pay are never “lost” if you don’t end up needing care.
Here’s how it works: Let’s say you make a single premium payment of $200,000 into a hybrid policy. This amount will provide:
- A death benefit approximately equal to the premium, payable to beneficiaries if care is never needed
- Long-term care coverage, which is two to three times larger than the premium (e.g., $400,000–$600,000 in LTC benefits)
- Guaranteed premiums, protecting against the rate increases
These policies can be structured as a single payment, or you can pay over a period of time, allowing flexibility in how you fund them. They can also include annual inflation protection, ensuring that the benefit keeps pace with rising care costs.
How the hybrid policy works will depend on how much you pay and the benefits offered by the insurance company you use.
Liquidity, Leverage and Legacy
The beauty of hybrid LTC insurance lies in its versatility. The funds aren’t locked away. You can borrow against the policy if needed, and the value remains part of their overall estate plan. Joint policies for spouses add another layer of efficiency, allowing either partner to draw on the shared pool of benefits as needed.
In short, this is a way to leverage idle capital into a vehicle that protects both your health and your wealth. If you never need care, your beneficiaries receive a tax-advantaged death benefit. If you do need care, the policy provides substantial, tax-free resources to fund it without disturbing your investment strategy or legacy goals.
Tax Advantages for Business Owners
There are potential tax advantages to funding long-term care through a business structure. Because LTC benefits are treated as medical expenses, certain portions may be deductible depending on entity type and policy design. Even for individuals, hybrid policies qualify as medical coverage for tax purposes, allowing withdrawals for care to be received income-tax-free.
Timing Is Everything
The ideal time to explore LTC coverage is around age 50, when you’re still insurable, your health is strong, and your retirement savings are well on track. Health is often the deciding factor in eligibility. Waiting until a medical condition arises can limit options or dramatically increase cost.
Address Retirement Planning & Estate Planning
Hybrid LTC insurance is a strategic wealth-preservation tool. For high-net-worth individuals who’ve worked a lifetime to build and protect their wealth, it ensures that long-term care doesn’t come at the cost of legacy, lifestyle or loved ones.
Contact HWP
HWP, a leading insurance agency, offers customized solutions for successful individuals and families. We represent the major insurance carriers in the life and LTC insurance sector and can provide you with a policy that fits your goals. With a strong presence in Washington, D.C., Annapolis and Southern Maryland, we offer guidance to protect what matters most. Learn more at hwphillips.com.
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