By Marc Gilman
📞 Call (800) 927-9326 or email to talk through funding options before you finalize your retirement plan.
Most retirement planning conversations focus on one question: will you have enough income to live on? For a lot of business owners, that’s the wrong first question. The right one is: what happens to the people who depend on you if something happens to you?
That question gets a lot more urgent when a business owner is also the primary caregiver for a spouse or child managing a chronic condition. If that’s your situation, the way you fund your own protection deserves more thought than a standard retirement conversation usually gives it.
Key Takeaways
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Retirement removes income, group coverage, and often the caregiver’s own physical availability all at once — and those losses hit simultaneously.
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Hybrid life insurance policies with living benefits pay out while the insured is alive, not just at death — covering terminal, chronic, and critical illness events depending on the policy.
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Business assets can often fund this kind of policy before retirement through structures like a key person policy or a Section 162 executive bonus arrangement.
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Not all hybrid policies are built the same — some cover chronic illness only, others combine chronic and critical illness protection on one policy. The difference matters for families managing more than one type of health need.
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This decision touches insurance, tax, and business succession planning together — it’s worth a coordinated conversation with your agent, CPA, and financial advisor.
Why does this coverage matter more than most business owners realize?
Two sets of numbers help answer that question.
The cost of care is larger than most families plan for. A March 2026 report from the AARP Public Policy Institute found that home care costs rose nearly 50% between 2019 and 2024 — a rate of roughly 7.9% per year, nearly double overall inflation. The median annual cost of home care for someone receiving just 30 hours of care per week is now $51,480 — more than twice the average annual Social Security benefit of about $23,700. For a family in which one member needs around-the-clock help, costs can reach well into six figures annually. Private nursing home rooms now run up to $128,000 per year, according to Genworth/CareScout Cost of Care data cited in the AARP report.
To put those numbers in context: the median household income for adults 65 and older is approximately $60,000 per year — meaning even a moderate level of home care, like 30 hours per week, costs roughly as much as a typical older adult earns in an entire year. Median financial assets for households aged 75 and older are approximately $50,000 — barely enough to cover a few months of full care. The caregiver who can no longer provide care at home because of their own health isn’t just losing a paycheck; they’re exposing the family to an expense that compounds every month.
The unpaid caregiving figure is striking. The AARP report estimates that family caregivers provided over $1 trillion in unpaid care in 2024. For a retiring business owner who has been functioning as a primary caregiver, that informal contribution has real dollar value — and it disappears the moment their own health changes.
Most people also overestimate what Medicare will cover. Nationwide’s Retirement Institute found that 58% of U.S. adults with household incomes above $75,000 expect Medicare to pay for long-term care. It won’t. Medicare functions as health insurance for recovery from illness or injury — it does not cover most in-home care, nursing home stays, or assisted living. According to the U.S. Department of Health and Human Services, 56% of adults who turned 65 between 2021 and 2025 are expected to need long-term services and supports during their lifetime. For a business owner heading into retirement who is also the primary caregiver for a spouse or child managing a chronic condition, the question isn’t whether this risk matters — it’s how to fund against it while the business still provides the assets to do so.
Why does retirement change the caregiving equation?
While you’re running the business, your income, your health insurance, and often your sheer physical presence are doing a lot of quiet work holding things together for your family. Retirement changes all three at once. The paycheck stops. Group coverage may end. And if your own health declines — even temporarily — there may be no one else positioned to step into the caregiving role you’ve been filling.
For a business owner who is already caring for a spouse with chronic health needs and a child managing a serious condition, this isn’t a hypothetical. It’s a real gap: who provides care, and who pays for it, if the caregiver himself becomes the one who needs care?
What is a hybrid life insurance policy, and why does it fit here?
A hybrid life insurance policy combines a permanent death benefit with living benefits — riders that let you access a portion of that death benefit while you’re still alive, if certain health events occur. Depending on the carrier and policy, that typically includes:
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Terminal illness — access to benefits if a physician certifies a life expectancy of 12 months or less
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Chronic illness — access to benefits if you’re unable to perform two of six Activities of Daily Living for 90 consecutive days, or require substantial supervision due to severe cognitive impairment
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Critical illness — access to benefits following a physician-certified diagnosis such as heart attack, stroke, life-threatening cancer, kidney failure, or similar conditions
For a caregiver, this structure does something a standard term policy can’t: it protects the family while you’re alive and unable to work or provide care, not just after you’re gone. If a health event sidelines you, those living benefits can help pay for outside care for a dependent spouse or child, cover your own medical needs, or simply replace the informal caregiving you’d otherwise be providing yourself.
Why fund it through the company instead of personally?
For a business owner heading into retirement, the company itself is often sitting on assets — retained earnings, cash reserves — that can be redirected before the business winds down or changes hands.
Funding a policy like this through the business, structured properly (commonly as a key person policy or an executive bonus arrangement under IRC Section 162), allows those business assets to convert into a personal protection asset before retirement, rather than sitting idle or being distributed less efficiently.
The right structure depends on how the business is organized, how it’s being transitioned or sold, and your personal tax situation — this is a conversation for your CPA and financial advisor as much as it is for your insurance agent. But the core idea is straightforward: use business assets, while the business still exists, to fund a protection plan the family will rely on long after retirement.
What does this look like with a real product?
To make this concrete: Mutual of Omaha’s Life Protection Advantage IUL (Indexed Universal Life) is one example of a permanent policy that combines a death benefit with all three living benefit riders — terminal, chronic, and critical illness — on a single policy.
The chronic illness rider triggers when the insured is unable to perform two of six Activities of Daily Living for 90 consecutive days — the same clinical threshold used in long-term care insurance. The critical illness rider covers physician-certified diagnoses including ALS, kidney failure, life-threatening cancer, major organ failure, heart attack, and stroke. The terminal illness rider provides access to benefits when a physician certifies a life expectancy of 12 to 24 months or less, depending on the state.
The policy’s cash value is indexed to a market benchmark with a 0% floor — meaning market downturns can’t reduce the cash value — and coverage is designed to remain in force into the insured’s 90s as long as the policy doesn’t lapse. Policies under this product line are issued by United of Omaha Life Insurance Company, a wholly owned subsidiary of Mutual of Omaha, which carries an A+ rating from both AM Best and S&P Global as of 2026.
This is the type of policy that can be funded through a Section 162 executive bonus arrangement or structured as a key person policy — using business assets to create a personal protection vehicle that follows the owner into retirement.
One important point: not every Mutual of Omaha policy includes all three living benefit riders. Some products in their line cover terminal and chronic illness but not critical illness. That distinction is exactly why the conversation with a licensed agent matters — the right product depends on which health events the family most needs to protect against.
What should a caregiver-owner do next?
If you’re heading toward retirement and you’re also the one holding things together at home, a few questions are worth answering before you finalize anything:
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Does your current retirement income plan account for a gap in caregiving if your own health changes?
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Have you looked at whether business assets could fund a policy before the business transitions?
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Do you know which carriers combine chronic illness and critical illness protection on a single policy, versus offering only one or the other?
That last one matters more than people expect — not every hybrid policy covers the same events, and the difference between a chronic-illness-only policy and one that also includes critical illness protection can be significant for a family managing more than one type of health need.
If you’re weighing how to fund protection like this before you step back from the business, we’re glad to walk through the options and how they’d apply to your specific situation.
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📰 Related: What Medicare Doesn’t Cover — and What Does · Long-Term Care Planning: What to Consider at Every Age · How Much Life Insurance After the Kids Are Grown
