What is hybrid long-term care insurance?
Hybrid policies, also referred to as long-term care/life insurance policies, life insurance with a long-term care rider, and asset-based life insurance and long-term care policies, are an increasingly popular alternative to traditional LTC insurance. These policies combine life insurance with long-term care coverage and allow you to draw from your death benefit in order to pay for long-term care. With a hybrid policy, you get a large pool of money to work with, which you can then put towards any long-term care you may need. Funds not used for LTC are then passed on to your heirs. Policies like this give you the comfort of knowing that you have money set aside for care should you need it, but those funds won’t go to waste if you do not end up needing long-term care.
There are other benefits to hybrid policies, too. Unlike traditional LTC insurance, the cost of premiums for hybrid policies is noncancelable, meaning that there is no risk of rates increasing over time. Those who are older or in poorer health will also generally have an easier time acquiring a hybrid policy than a traditional one. Some hybrid policies even allow enrollees to get their money back if they later decide that they no longer want the coverage.
Hybrids are not without their downsides, though, the main one being their cost. A hybrid policy may run two to three times more than a normal LTC policy despite providing many of the same benefits, and you have a significantly shorter period of time to pay into it. Premiums paid on hybrid policies are also non-tax-deductible. Last but not least, you are not guaranteed to earn market rates on a hybrid policy, which makes interest a major concern. If interest rates rise, purchasing a hybrid policy could mean forgoing thousands of dollars in potential earnings on your investment. More information about the benefits and drawbacks of a hybrid policy can be found in our article on the subject.
Which Pre-Existing Conditions Are Declined for Approval?