Are Hybrid Long-Term Insurance Policies Right for You?


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A hybrid policy is a good option if you don’t like the idea of having to pay for long-term care insurance that you might never use. If you don’t use the benefits, the premium money doesn’t disappear. Your heirs may be able to get most of it back.

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An increasing number of Americans are reaching the age where they need to consider how to pay long-term care. A hybrid insurance policy that combines long-term and life insurance continues to be attractive for many. These policies protect retirement savings from being depleted by unexpected expenses that retirees cannot pay. If the insurance is not required, there are death benefits that can be passed to their heirs.

Here’s an example of how it could work

Recently, I met with a couple in their 50s who were planning to retire soon. Both had successful careers and have saved enough money to build a retirement fund that will provide financial support for them over the next 40 years.

The Woman’s Guide To Long-Term Care

Although they didn’t have long term care insurance, they had $200,000 in savings set aside to pay for any long-term needs. They changed their minds after seeing the advantages of a hybrid long-term and life insurance policy.

A hybrid policy, which covers long-term care for both spouses, will cost $164,400 per couple. The lump sum payment is made upfront. They will be eligible for long-term care insurance, with monthly payments up to $5,000 per person. The policy is unlimited in benefit, meaning that as long as they are eligible for benefits, they will get them. This is something that isn’t available in traditional long-term policies.

Here’s the best part: If either person is unable to care for themselves, their heirs will be entitled to a $125,000 tax-free insurance benefit. This effectively “reimburse” 76% of the premiums. This policy transfers the financial risk to an insurance company for little cost to the couple.

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It makes sense

Insurance that covers long-term care costs for those with chronic illnesses or disabilities who are unable to care for themselves for a prolonged period of time. These include Alzheimer’s or dementia, arthritis, cancer, nerve system diseases, and diabetes.

A person who is unable to perform daily activities such as dressing, grooming and eating on their own will be considered disabled. The insurance will cover the cost of hiring assistance.

The Long-Term Care Conundrum

According to the Centers for Medicare & Medicaid Services, 7 out 10 people 65 and older will require long-term care.

The cost of long-term care insurance is expensive and will continue to rise without it. In Genworth Financial’s 2020 Cost of Care Survey, Genworth Financial estimates that the national average cost of a home-health aide is nearly $55,000 per year and that a semi-private room at a nursing home is $93,000.

Benefits and Features

Here are some benefits of a hybrid policy for long-term health insurance that is attractive to financially wealthy individuals.

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There is no increase in insurance premiums. A policy’s cost can be locked in at the original purchase date. It is not subject to an increase. This is not true for traditional long-term care policies. It can cause financial stress for some as premiums may increase substantially over the policy’s life.

Substantial Return on Premium: This protection protects those who don’t need long-term care. Although data suggests that long-term healthcare is likely, policy owners should be aware that long-term insurance does not cost any extra. Most policies’ death benefits will reimburse most of the premiums paid.

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Leverage: An individual could either set aside $150,000 for long-term needs or use the $150,000 to buy a hybrid policy. A hybrid policy will return the majority of their $150,000 investment if they spend $150,000 on it. The policy has a lot of leverage because they could receive long-term care benefits that are significantly more than $150,000.


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