Types of Hybrid Life Insurance Products

Types of Hybrid Life Insurance Products

Long-term health care has become a big issue for Americans approaching retirement age, according to a LIMRA study. The study suggests that most Americans will be better off adopting a hybrid life insurance policy that includes long-term care. Many people, however, assume long-term care is expensive, so they don’t pursue it. Here’s what you should know about various life insurance options that provide long-term care.

Different Types of Hybrid Life Insurance Policies You Should Know

Here are five types of hybrid insurance policies:

  1. Linked-benefit life insurance

    A linked benefit life insurance policy is the best version of a hybrid life insurance policy that provides long-term care. Compared with the monthly premium you pay, the value of the benefits will be worth five times more. That means someone who’s still a decade away from retirement and who has contributed $100,000 in premiums to a hybrid plan has access to over $500,000 in benefits.

    The American Association for Long-Term Care Insurance has reported that 84 percent of long-term care coverage in 2019 was linked-benefit life insurance.

  2. A long-term care rider on a life insurance policy

    Some life insurance plans give you the option of buying a long-term care rider with your basic life insurance plan. You must make this decision at the time of purchasing your basic plan.

    While long-term care benefits reduce your death benefit amount, they can pay the actual costs of long-term care regardless of these costs. It’s still typical for most long-term care plans to provide up to a $20,000 death benefit once all the long-term care coverage is used up.

  3. Chronic or critical illness rider on life insurance

    With a chronic or critical illness rider added to your policy, it’s possible to take money from your death benefit to pay for long-term care. This coverage has its limits compared with signing up for an actual long-term care policy.

Pros of Hybrid Life Insurance

The two main advantages of a hybrid life insurance policy that combines short-term and long-term needs are consistency and flexibility. You are guaranteed to lock in a premium at a specific price, and you can either make monthly or annual lump sum payments.

Another advantage to a hybrid life insurance policy is that it can pay a family member who takes on the role of a caregiver. This option usually doesn’t exist with traditional long-term care policies.

Cons of Hybrid Life Insurance

Hybrid policies don’t work for everyone, as some individuals may not view them as cost-efficient for their needs. You likely will not get the best coverage for what you pay. A dedicated long-term care policy usually gives you better coverage for the money.

Another disadvantage to a hybrid life insurance policy is that it may involve long waiting periods. They typically have a waiting period of 90 days before you can access benefits. On the other hand, longer waiting periods can reduce the monthly premium.

When Should You Buy a Hybrid Insurance Policy?

Individuals who need stand-alone long-term care are typically in their early 50s, while older people gravitate more toward a hybrid policy. Certain carriers of hybrid life insurance offer plans for seniors as old as 85, but at a higher cost than what a 65-year-old pays.

Learn More About Hybrid Life Insurance with Long Term Care Advisors

Getting a hybrid life insurance policy can help pay for long-term healthcare, as long as it’s not your primary concern. Otherwise, a stand-alone long-term care plan might work better. Contact us here at Long Term Care Advisors for more information on securing a hybrid life insurance policy.

Long Term Care Insurance Advisors

Long Term Care Insurance Advisors is an independent insurance broker serving Minnesota and western Wisconsin residents and small businesses for the past 3 decades.