Hybrid Long-Term Care and Life Insurance Plans

Many elder Americans are skeptical about long-term care insurance. In an effort to entice seniors to buy long-term coverage, insurance companies have started selling hybrid plans that combine traditional life insurance plans with long-term care. These policies can cost around $100,000 upfront for a $5,000 monthly benefit.

These hybrid policies are typically structured so that care payments come out of the death benefit dollar for dollar. This means that the buyers will pass on a reduced or no death benefit if the policy is tapped. Some insurance companies will guarantee buyers that they can get back their premiums at any point prior to tapping the benefit.

In 2010, many insurance companies asked for and received permission from state regulators to raise premiums for some of their traditional long-term care policies. One insurance company, Grenworth, saw an 124% increase in its sale of long-term care and hybrid policies from 2009 to 2010. Conversely, other insurance companies saw sales of traditional long-term care drop 23% industry wide in 2010.

For more information on hybrid insurance plans, see Elizabeth Ody, Insurers Pair Long-Term Care With Life to Entice Older Buyers, Bloomberg Business Week, May 19, 2011.

Special thanks to Jim Hillhouse (WealthCounsel) for bringing this article to my attention.