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Can 1 + 1 = 3? A Look at Hybrid Insurance Products with Long-Term Care Insurance

Although relatively few people have purchased private long-term care insurance, there is continuing interest in increasing the number of individuals who have such coverage. The desire to insure against long-term care (LTC) risk competes with the need to insure against the many other risks we face in life, and many people decide that purchasing LTC insurance is not a viable option. This outcome is more likely to the degree that some people are in denial about or have misinformation about their potential LTC needs or the degree to which government programs will pay for their care.

One potential approach to increasing the appeal of LTC insurance is the offering of “hybrid” products combining LTC insurance with other insurance, such as life insurance, annuities, and disability insurance. This AARP Public Policy Institute Issue Paper analyzes these LTC insurance hybrids and finds that:

  • these products may overcome psychological barriers and/or misinformation for some consumers regarding LTC insurance
  • they may represent one way to achieve a partial solution to the problem of individuals choosing which of many important risks to insure against
  • some may encourage purchase of LTC insurance earlier in life
  • most do not offer substantial pure economic appeal

Almost all of the individual insurance components in a hybrid are complicated in their own right, and present areas of concern to consumers. Therefore, hybrid insurance products will require better consumer education and government protections in the face of increasingly complex decisions. (41 pages)

Pub ID: 2007-11

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