This Isn’t Your Parents’ Long-Term Care Insurance

What is hybrid long-term care insurance?

Hybrid policies combine life insurance and long-term care benefits. There are two types of hybrid products: linked-benefit long-care insurance and permanent life insurance with a long-term care rider. 

Linked-benefit insurance is similar to a traditional long-term care policy, with an added life insurance benefit paid to your beneficiaries if you don’t use the long-term care benefits. Some policies provide a guaranteed death benefit — typically 5 to 10 percent of the policy’s original death benefit — that will pay out even if all the long-term care benefits are used, Roers says. In some cases, insurance companies put a cap on the guaranteed death benefit, such as $10,000, he says. 

Typically, a linked-benefit policy provides an initial long-term care benefit that’s worth two to three times the plan’s premium. Over time, if the policy has inflation protection (an optional add-on), that benefit can grow to around five or six times the original premium amount, Roers says. 

For example, a 55-year-old man in average health could get a linked-benefit policy from Nationwide for a lump sum payment of $58,488 that would provide an immediate long-term care benefit of about $162,000, he says. By age 85, the benefit will have increased to $405,000.

But there’s an important wrinkle: If you need long-term care, the death benefit is used first. Once you’ve exhausted that amount, the long-term care benefit starts paying out.

Linked-benefit policies have monthly and lifetime limits for long-term care benefits. Unlike stand-alone long-term care policies, the policies typically have a fixed premium, meaning your rate won’t increase over time. Many also include a return of premium feature, which allows you to recoup some or all of the money you’ve put into the policy if you decide to cancel, Ardleigh says.

Linked-benefit policies use an indemnity model for claims, meaning they’ll pay out your monthly maximum benefit without requiring receipts for care that you receive. This gives you the flexibility to pay for informal care from a family caregiver, Roers says. 

Alternatively, you can add a rider to a permanent life insurance policy that will allow you to access the death benefit early to pay for long-term care needs. The catch: Using the long-term care benefit reduces the death benefit paid to your heirs, dollar for dollar, Ardleigh says. So, if you use $200,000 of a $500,000 life insurance policy to pay for care, the death benefit would fall to $300,000.

Often, for life insurance with a long-term care rider, the product will allow you to access 100 percent of the death benefit, at a rate of 4 percent per month, for long-term care needs, Ardleigh says. You don’t need to submit receipts for a long-term care cash indemnity policy, which provides the same flexibility as a linked-benefit policy.

“If you need life insurance anyway, the idea [that] you could have life insurance and the option to use life insurance to pay for long-term care gives you flexibility,” Ardleigh says. “That appeals to most people.”

When is the best time to buy hybrid long-term care insurance?

Most long-term care insurance claims begin after age 80, Slome says. But you can’t wait until you need care to buy coverage. At that point, it’s too late.  

“For many people, the early to mid-50s are a practical time to explore long-term care insurance,” Roers says. “Buying at that stage can offer several advantages: Premiums are typically lower than if you wait until your 60s, health is often better — improving the likelihood of qualifying for coverage — and the policy has more time to benefit from inflation protection.”

Consider: You’ll pay 50 percent more, on average, if you buy long-term care insurance at age 65 rather than 55, according to AALTCI.  

Eligibility is a consideration, too. Roers says your chance of being turned down for coverage because of health problems is about 1 in 5 in your 50s, but about 1 in 2 in your 70s. 

However, he says many common health conditions are not automatic disqualifiers for long-term care coverage, especially if they’re well-managed and stable. 

“A history of certain cancers may still be insurable depending on the type, stage, how it was treated and how long the individual has been cancer-free,” Roers says. “Similarly, someone with a prior heart attack or minor stroke may be considered for coverage if it was a single event, they’ve fully recovered, have no lasting impairments, and don’t have significant complicating factors such as uncontrolled diabetes or ongoing tobacco use.”

Bear in mind that every insurer has its own underwriting standards, and some might be more willing to offer coverage than others.

How much coverage do you need?

The amount of coverage you need depends on a few factors.

Start by considering what form of care you’d want to receive if you need it. Then identify how much that care will cost in the city and state where you expect to live. Insurance company Genworth and its subsidiary CareScout have a tool that shows the median cost of care by location for in-home care, nursing homes, and community and assisted living.

The next step is to determine how much of your care costs you want insurance to cover. Look at your assets and sources of income in retirement, such as Social Security, to determine how much you can realistically cover out-of-pocket. For example, if you can afford to pay $2,000 a month and the median cost of assisted living in your area is $6,000, a policy with a maximum monthly benefit of $4,000 might be a good fit. 

How much does hybrid long-term care insurance cost?

Hybrid long-term care insurance products typically cost significantly more than stand-alone policies. “You can’t get a product that does two things without charging more,” Slome says. 

Costs can vary depending on your age, health, gender, marital status and the type of policy you buy — plus the coverage amount, benefit period and whether you buy additional features such as inflation protection.

Prices also vary widely among providers. AALTCI crunched numbers in January 2024 to provide a couple of examples. 

On average, a traditional long-term care insurance policy with a $165,000 pool of benefit would cost a single 55-year-old man $900 annually and a single 55-year-old woman $1,500 annually.

For a linked-benefit policy with a $180,000 pool of long-term care benefits and a minimum death benefit of $120,000, the average cost is $3,540 annually, or a $52,753 lump sum, for a 55-year-old man and $3,265 annually, or a $54,022 lump sum, for a 55-year-old woman.  

A permanent life insurance policy with a long-term care rider is usually cheaper than a linked-benefit policy but more expensive than traditional long-term care insurance, Roers says.

How can you save money on a hybrid policy?

There are several ways to keep costs down without sacrificing coverage. The best way is to get a policy when you’re younger (generally, in your 50s) and healthier, which locks in a lower rate, Roers says. Many insurers offer a 10 percent discount if you’re in excellent health, he says.  

Making a single lump-sum premium payment, rather than shelling out annual premiums, can also reduce the total amount you pay over time.

Although you can shop for a policy yourself, consider working with an independent insurance broker or financial adviser who specializes in long-term care insurance, Slome says. These professionals can help you obtain and compare quotes from multiple insurers to help you find the best hybrid policy for your needs and budget.