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Hybrid long-term care insurance

Long-term care has become extremely expensive and a financial hardship for people as they become older and for families of aging parents. Long-term care planning should include payment options such as a hybrid long-term care policy.

A traditional long-term care insurance may be an option for families with limited assets. For families with significant assets, some experts recommend that they self-insure by using their own savings or investments instead of purchasing insurance.

A hybrid policy may be better, however. These combine the benefits of life insurance or an annuity with long-term care benefits.

A hybrid policy may be purchased by paying a one-time lump sum premium or by making payments over many years. It will act like a traditional life insurance policy and pay out a death benefit to a beneficiary if an insured person dies without receiving long-term care.

These policies, however, will pay benefits for long-term care if it is needed. Benefits are paid in an amount elected when the policy is purchased for a selected time like a traditional long-term care policy. One of the best advantages of a hybrid policy is that the amount of money needed for care can exceed its death benefit by many times over, in certain cases.

These policies also have many advantages for families with substantial assets. Unlike many traditional long-term care policies, premiums can be locked in when the policy is purchased without increases.

Even though it may be anticipated that long-term care will be needed, the policy's death benefit will pay back most or all of the premiums that were paid. Also, potential benefits could exceed the premiums paid and provide better security than placing the same amount of money in other investments.

The lump sum purchase feature of many hybrid polices, unavailable with traditional policies, provide advantages to people who have permanent life insurance policies that no longer meet their financial needs. Life insurance policies may have large cash gains that can be taxed if they are surrendered or cancelled.

However, these policies can be rolled over to a new hybrid policy, that has more value, without tax consequences. This may be done in a lump sum to avoid future premiums.

An attorney can review options for financing and dealing with nursing home care. They can help assure that the proper documents are drafted for these needs.

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