When it came to long-term care insurance options in the past, the only offering was a standalone policy. These policies offered coverage only for long-term care coverage in either your home or in a specialized facility.

Today, you can buy a policy that bundles long-term care coverage with life insurance coverage (or an annuity). This means you get two important coverages in one policy: life insurance, which offers your loved ones financial support if you were to pass away, and long-term care coverage, which covers you if a chronic illness or disability means you’d need long-term care.

These policies go by several names such as hybrid, combo or linked-benefit products. No matter their name, there are several important benefits to having both life insurance and long-term care insurance in one policy. They include:

  • Benefitting from more complete coverage. Life insurance may be a priority for you and your family right now while the need to pay for long-term care may become a higher priority in the years ahead. A hybrid policy serves two very important coverage needs in one policy.
  • Having flexible payment options. You can pay for a hybrid policy with either a lump sum or through an annual stream of premiums.
  • Having the option to lock in your premium. Unlike traditional standalone long-term care insurance policies, many hybrid policies give you the option of locking in your premium. This means you pay a consistent premium the entire time you own the policy and don’t need to worry about price increases.
  • Enjoying a better return on your premium dollars. There is no “use it or lose it” aspect to hybrid policies. That’s because the life insurance portion of a hybrid policy offers a death benefit and/or an annuity payment, ensuring that all those premium dollars you paid will return to your family if you never need long-term care. (Just know that tapping the long-term care portion of the policy will reduce the death benefit on the life insurance side of the policy.)
  • Being easier to obtain. Medical underwriting for hybrid policies is often less involved than it is with traditional standalone long-term care policies.
  • Benefitting from tax savings. Life insurance benefits are almost always paid out tax-free while premiums paid for long-term care insurance can sometimes be deducted from your state and federal taxes.
  • Potentially saving you time and money. A hybrid policy often saves you the time and expense of buying two separate policies.

Source: 2020 Life Happens, LONG-TERM CARE INSURANCE 101