Hybrid LTC and Term Life Insurance

An Alternative to Traditional Long Term Care Insurance

One of the innovative approaches to handling long term care planning to asset based or hybrid insurance. It allows the policy holder to be reimbursed for some or all of their long-term care costs should they need extended care in their home, assisted living or in a nursing facility. If the policy holder does not need long term care in their lifetime their beneficiary will receive life insurance upon the death of the policy holder. For well-off people in particular, this alternative to traditional policies or the option of self-insuring could be an attractive possibility.

A person can buy a hybrid policy by paying a one-time lump sum premium or by paying over a number of years. With this type of policy there could not be a rate increase in the lifetime of the plan (many traditional LTCI plans either build in rate increases in the structure of their policies or can be susceptible to rate increases down the line). With what is called a COB (Continuation of Benefits) rider, a hybrid policy can be turned into a lifetime unlimited plan.

Hybrids, however, are not for everyone. They do require significant assets to fund and inflation protection as an add-on rider can be prohibitively expensive. For most individuals in good health with a modest financial estate, a traditional long term care insurance plan is typically the most affordable option. It is pure insurance that is meant to cover the financial risk of an average long term care event in a person’s life (statistically about 3 years times the annual cost of care for in-home care or assisted living in current dollars per person).

Read more about Asset Care Managing Long-Term Care Spending Risk in Retirement

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