15 Minute Read.
This article will cover who should consider hybrid long term care insurance plans as part of their retirement planning. It will also cover at what age to consider a purchase, and who currently are the best hybrid long term care insurance companies on the market.
As the aging population continues to grow, the need for long-term care insurance has never been more pressing. Traditional long-term care insurance plans are designed to cover the costs of care for chronic illnesses or disabilities, such as nursing home stays, assisted living facilities, or home healthcare. However, as times have evolved, the introduction of hybrid plans has provided a new, flexible solution to address the long-term care needs of many individuals.
Hybrid long-term care insurance plans combine the benefits of life insurance or annuities with long-term care benefits. If the policyholder never needs long-term care, their beneficiaries receive a death benefit. If the policyholder does require long-term care, the policy covers these costs, often exceeding the death benefit. Let’s explore some of the best hybrid long-term care insurance plans available in 2024.
Long-Term Care policies are designed to pay for, above all, funds that allow you to stay in your own home when the need arises in your future. We’ll talk about the odds of needing LTC in this article, as well.
What’s Covered?
If you were to need long-term care, your Hybrid Long-Term Care Insurance policy can pay you in CASH to spend anyway you like with receipts for care in four settings:
- Home Health Care – This is where most claims begin.
- Assisted Living
- Nursing Homes
- Adult Day Care, and Community Care
The old way to solve the problem was to either buy a traditional long-term care insurance policy (reimbursement model–non-cash payment) or to self pay.
As traditional LTC insurance becomes more costly, existing policyholders see premium increases and are harder to qualify for, Hybrid LTC insurance plans are turning out to be a preferred option for consumers, as a rule, with assets above $500,000. These policies work by bundling together a life insurance policy or annuity coverage with Long Term Care coverage.
The primary appeal of this approach is that it eliminates the use-it-or-lose it approach typical in traditional long term care products. Even better, hybrid policies have fixed premiums that are guaranteed and cannot be increased in the future. Lastly, the three top selling hybrid long term care insurance policies pay you in cash so that you can spend the money any way you like.
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Who Should Consider Hybrid LTC Insurance?
First: assess your current financial situation. Hybrid policies work best when funded with either a single, guaranteed premium or a payment over 5 or 10 years. A good first step is to decide where that premium will come from.
Individuals or couples who have at least $400,000 (or $500,000 in the case of couples) in liquid assets that are a good fit for a hybrid policy. Keep in mind that with most plans, upon death, your full premium is returned, tax-free, as a death benefit, less LTC claims made. We recommend this threshold as a rule because you don’t want more that 33% of your net worth invested in you hybrid long term care insurance policy.
The hybrid policy: an alternative to other “safe havens” for your money.
We find ourselves in a low-interest environment, meaning traditionally safe investments like bonds or bank CDs are paying lower returns. A savvy investor might consider taking some chips off the table and moving a portion of these safe-haven assets to a hybrid LTC policy.
Life insurance policies are guaranteed to the extent of the claims paying abilities of the insurers, so stick with a highly-rated insurer with a solid 100+ year track record, and your premium dollars are in a secure place.
The big upshot of this strategy is that it allows you to leverage your dollars should you need long-term care, while still maintaining access to capital. Also hybrid long term care insurance benefits are paid tax free. Some hybrid policies include no surrender charges after 5 years, meaning you can cancel, “cash in,” and get all of your money back should you change strategies in the future.
How do Hybrid LTC & Life Plans work?
The concept behind hybrid long term care plans is fairly simple. Most of these products combine life insurance with long term care insurance into a single hybrid policy. The emphasis with the benefits is on the Long Term Care Insurance benefits, with the life insurance secondary.
Option 1: Pay Upfront
Hybrid long term care insurance policies typically are funded with a single upfront premium and offer the benefits associated with the life/annuity policy base, together with additional benefits of long term care coverage.
Option 2: Pay Over 5 or 10 Years
Alternatively, you can select a spread-out payment schedule that affords time to liquidate other assets or to dollar cost average into your hybrid policy. With these payment plans, premiums are guaranteed.
What You Get With Single Premium Long-Term Care Insurance is…
A life insurance + LTC policy or single premium long-term care insurance will provide considerable leverage on your money for benefit payments to fund long term care expenses. This policy basically creates a pool of money that can be used to pay for long term care either for a specified minimum period of time, or for a lifetime.
The way these policies work is by providing a Accelerated Death Benefit Rider for qualified long term care needs. This simply means that should you need long term care services, the amounts will be paid while you are still alive, and deducted from the death benefit value.
Other hybrid life insurance policies offer a standalone LTC rider that can be purchased at an additional cost. LTC riders are not typically only available with permanent life insurance policies such as Universal Life, Whole Life, and Indexed Universal Life policies (not term life policies).
Can Annuities Pay for Long Term Care?
Annuity for Long-Term Care
Yes they can! If you are looking to find the balance between insuring and self-insuring your long term care risk or if you have significant health issues and cannot medically qualify for a traditional hybrid long term care insurance policies, the hybrid LTC annuity is worth a look.
There are annuity products that don’t require health qualification other than not already having Alzheimer’s or living in a nursing home and these plans will give an extra boost in the annuity’s payout if long term care is needed.
The Annuity + LTC hybrid starts as a deferred annuity. It may entail a single lump sum premium or structured deposits made over time. If the annuity owner does not need any long term care, then the annuity gains interest and functions like any other fixed annuity.
However, if the annuity holder needs care, a formula will be used to establish the amount of benefits available to them every month.
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Pros and Cons of Hybrid Long Term Care policies
What are the advantages of LTC life insurance hybrid?
- LTC hybrid products guarantee return of premium either in the form of long term care benefits or a death benefit.
- Medical underwriting is usually less stringent with hybrid long term care insurance.
- Premium rates are fixed (you don’t have to worry about future premium increases).
- Preferential tax treatment for repurposing an existing life insurance and annuity policy via 1035 exchanges. The 1035 exchange must be from one “like” product to the same “like” product. Life Insurance to Life Insurance or Annuity to Annuity.
What are the disadvantages of LTC hybrid products?
- Hybrid policies usually require a single premium long-term care insurance payment or structured annual payments.
- This might be expensive for some people. However, newer products are emerging that offer flexible payment options.
- LTC payouts will reduce your policy’s cash value or death benefit. This might mean leaving little or no death benefit to your heirs.
Is Hybrid Long Term Care Insurance right for you?
Best Hybrid LTC Policies for 2024
How to find the best Hybrid LTC products for you?
Use a company such as LTC Tree who specializes in helping people nearing retirement age find the perfect long term care insurance plan. The company was established in 1995 and has grown to be one of the leading ‘virtual’ long term care insurance brokerage connections in the country. Every year, LTC Tree focuses on helping thousands of consumers find the right long term care insurance for their needs, including hybrid plans, and LTC annuities.
The company is based in Atlanta, Georgia with offices across the country and sells to consumers in all 50 states. They connect people with individualized long term care insurance plans from all the top hybrid long term care insurance companies. In addition to being established as one of the leading nationwide brokerages for LTC insurance, LTC Tree makes the process of shopping for a policy super easy. What makes this firm unique is the sheer number of long term care options that they present to customers. They work for you the client, not one particular insurance company.
Once you express interest in LTC coverage and fill a quick form on their website, LTC Tree gets you quotes from multiple long term care insurance firms while making affordability and your requirements a priority. By bringing the competition to you, they essentially change the game and give you the power to choose a custom hybrid LTC plan that’s best suited to meet your needs.
We included LTC Tree amongst our best hybrid life insurance LTC policy brokers in 2023 because they offer such a diverse portfolio of LTC plans and related products. You can easily use their service to compare long term insurance companies and long term care policies right from the comfort of your home.
1. Nationwide CareMatters II
Love The Cash Benefits.
*Note Nationwide’s breaking news announcement on their product below.
The Nationwide Care Maters II plan was launched in Fall of 2019 and updated the product again on 06/12/2023 where they actually lowered pricing again like they did in November of 2023 as a result of the Federal Reserve continuing to raise interest rates. The Nationwide CareMatters II product is unique in that it will pay your benefits in CASH so you can spend the money however you see fit, This removes the hassle of having to submit a claims form and receipts and wait for insurance company approval – a process potentially fraught with red tape.
Securian’s plan also has cash “indemnity” benefits so be sure to compare both plans side-by-side at no cost with the LTC Tree service.
Another advantage of Nationwide’s CareMatters II plan is that while it does have a 90-day waiting period, after that has been met you’ll receive a back-payment check to day one. That means on many plan designs you’ll receive over $40,000 by average claim age in your first benefit payment should you need Long Term Care benefits and make it to the 91st day of your “elimination period.”
Why Nationwide?
The Nationwide Care Matters II policy focus on three essential components of your LTC process, these include:
- Familiarity
- Choice
- Flexibility
Familiarity
Nationwide CareMatters II allows you the option of receiving care from your own home. This way you can access your LTC benefit from the comfort of your loving home. It will also also you to make any needed accessibility updates to your home as well as pay for caregivers including family.
Your heirs will also receive a death benefit equal to 20% of your policies specified amount.
Choice
Nationwide CareMatters II features countless customizable features to help meet all your needs. You can add inflation protection as well as adjust your premium payment schedule. Your options include:
- One time (single pay)
- 5 years
- 10 years
- Pay annually/mo to age 65
- Pay annually/mo to age 100
Flexibility
Nationwide CareMatters II understand that you cannot predict your future needs therefore it was built to adapt with you.
You can choose the care option that works best for you such as :
- Assisted Living
- Home Health Care
- Adult Day Care
- Nursing Home Care
- Hospice
- Family Care
- Alternative options
What if I never need care?
a common concern for many is purchasing a policy and never needing care. If you never need care with Nationwide CareMatters II you can rest easily knowing your heirs will receive a death benefit.
Liquid
Nationwide CareMatters II stays a liquid asset in the form of a cash surrender value.
2. Lincoln Moneyguard Fixed Advantage
This is one of the earliest hybrid LTC policies that triggered the life/LTC combo market.
Lincoln Moneyguard Fixed Advantage was just updated on 01/22/2024 where Lincoln substantially lowered pricing to compete with the other players in the space that did so earlier in the year. It’s a product mainly known for having no waiting period for LTC benefits. The policy is easy to apply for and get approved with. It entails a single upfront premium, long term care benefits (if need be) or life insurance (if you don’t need LTC). Many customers like this LTC life insurance hybrid because it allows you to flexibly pay your premiums over a period of 3-10 years.
With this new pricing rollout in January of 2024 Lincoln also added 50% of your benefits are now cash indemnity which although is not 100% like we want to see, couple that with the lower pricing and the zero day elimination period Lincoln’s Money Guard Fixed advantage just moved up to number two on our hybrid long term care insurance policy ranking leaderboard.
Although not as attractively priced as it used to be in prior years, this policy makes a decent hybrid option for single applicants, particularly younger applicants. Lincoln Moneyguard Fixed Advantage offers you:
- Flexible funding options (Pay upfront or over time)
- Inflation protection ( 3% to 5% compound growth options)
- Streamlined underwriting (No medical exams or labs necessary)
- Benefits sooner (No elimination period)
- Couples discount (Discounts for having a partner)
- On the go benefits (Moving? No problem!)
3. Minnesota Life SecureCare III (Securian Financial)
Pays Out Cash Indemnity Benefits.
On 01/23/2023 Minnesota Life also know as Securian Financial lowered rates 25%. This is a combination life and long term care policy that pays out 100% cash indemnity benefits. This is unlike many other LTC hybrid products that use the reimbursement model (where you have to submit your receipts as evidence before benefits are paid out). If you need long term care, you receive tax-free LTC benefits. In the case you do not need long term care, your heirs receive tax-free death benefits upon your demise. In the case you change your mind and want to quit the policy, you receive a cash surrender value.
To purchase to this policy, you select an initial long term care benefit amount, a benefit period (2-7 years), an acceleration of LTC Agreement (2-3 years), an extension of LTC Benefits Agreement (2-4 years) and inflation protection options.
Minnesota Life Securecare Features:
- LTC Benefit (Monthly benefit to help cover expenses associated with LTC)
- Return of Premium ( If coverage is no longer desired a refund of premiums)
- Death Benefit (Heirs will receive a death benefit)
- Reduced paid up benefit (Stopped paying premiums? Reduced paid-up benefit for the rest of your life.)
Long-Term Care Inflation Protection Agreements:
- 3% simple
- 5% simple
- 3% compound
- 5% compound
4. OneAmerica’s State Life Asset Care
Unlimited Benefits for Married Applicants or a Lifetime pay option.
If you want Unlimited Lifetime benefits and or the ability to pay a smaller premium each year for life, The State Life Asset care may be the ticket for you. It offers the possibility of unlimited benefits, and it is the only life insurance long term care hybrid to offer joint shared coverage for married applicants. Many policyholders love the fact that this product provides the maximum LTC benefits for married couples. Some plan designs also accept IRA money for funding.
Policy Riders and Options for One America Asset Care:
- Joint Life Option
- Waiver Of Premium:
- Asset Care Inflation Protection Rider (IPR)
- One America Asset Care Plus Continuation Benefits rider
Types of care:
- Assisted living
- Nursing facility
- Home health care.
- Bed reservation
- Care coordination
- Caregiver training
- Supportive equipment
- Adult day care
Funding Options:
- Single Premium (can be accessed immediately 3-4 times for LTC needs)
- Multi Premium (paid over 5yr ,10yr, 20yr, or until age 95)
- Qualified Money (IRA’s, Pension Plans, 401(K) and 403(B))
5. New York Life Asset Flex
Residual Death Benefit.
The Asset Flex is New York Life’s equivalent of the Lincoln Moneyguard II and OneAmerica’s Asset Care. Launched in 2017, this single premium universal life insurance policy allows the insured to accelerate some of their life insurance benefit for long term care needs over a period between 24 – 36 months. Should the policy owner exhaust their life insurance benefit, Asset Flex provides an Extension of Benefits for long term care rider so you receive benefits for up to 48 months.
Asset Flex premiums are paid in lump sum or in annual installments over a period of 5 to 10 years. This is a reimbursement type hybrid policy, which means you’ll need to provide receipts for qualified care services in order for benefits to be paid out. The policy has a 90 day waiting period, and there’s a residual death benefit that’s equivalent to 10% of the life insurance face amount.
New York Life Asset Flex features:
- Premium starting at $10,000.
- Full long-term care insurance benefits
- Money back promise
- Immediate access to life insurance and LTC policy benefits
- Payment options ( one time, annual, 5 year, 10 year)
6. State Life Annuity Care II Series
Excellent Annuity/LTC Product.
The State Life Annuity Care II is a single-premium deferred annuity that comes with LTC benefits. It is one of the best LTC hybrid annuities available that also provides a 5% compound inflation protection at a highly affordable price point. Your single premium grows as the AV (Accumulated Value) with a guaranteed minimum interest rate. This is the value that is passed on to your beneficiaries at death (if not needed for end of life care). Your premium also grows at a secondary, enhanced interest rate for the LTC Accumulated Value (LTCAV). This is the amount that your receive for qualified LTC expenses.
Annuity Care II is medically underwritten, which means you should be in reasonably good health to be able to apply. The policy is available for individuals within the 40-80 age bracket, and can be purchased by a single person or spouses. The minimum accepted single premium is $10,000. Make sure you select a premium amount that will be enough to cater for your needs.
State Life Asset Care easily qualifies as the top hybrid life insurance with long term care in the market right now. Options include:
- Life Insurance with Long-Term Care Benefits ( Use for LTC needs, cash value, or death benefit)
- Annuities with Long-Term Care Benefits (Invest in fixed annuity)
7. Bright House Financial: SmartCare
Bright House Financials Smart Care hybrid long term care product is a cash payment plan like Nationwide and Securian. In July of 2023 Brighthouse lowered their pricing on across the board. The Smart Care product offer about 25% more long term care benefits from the start and the potential for a higher life insurance benefits down the road.
I say potential because Bright House Financial’s SmartCare has a unique feature where they allow you to index the growth in your policy’s benefits to the S&P 500. The current estimate of the return over the next 20 years of their index is 5.69%. If the index hits the target you will get about a 2.8% return after internal fees are taken out. This growth then will increase your long term care benefits, life insurance and cash value. They again do have the 5% compound automatic inflation choice to choose from as well.
The slight risk to the consumer would be if we had bad markets over the next 20-30 years you would just be stuck with the benefits you started with which still would be about four times more than the premium put in.
How are benefits paid with Bright House Financial’s SmartCare?
Like Securian (Minnesota Life) and Nationwide where both pay you benefits in cash, so does Bright House Financial’s SmartCare. Once your claim is triggered they pay you in cash to spend any way you like on whatever you like without having to submit receipts.
Why is being paid in CASH with your hybrid long term care insurance product important?
Most all traditional long term care insurance plans are paid on a reimbursement level. This means you pay the bill, submit the receipt and then wait for the check to be sent to you from the insurance company. With those plans you also must use a state licensed caregiver and no family members can be paid either.
For example, when you are paid in cash you can find an independent care giver to take care of you in your home from sites like Care.com where you pay the person direct thus taking out the middle man, home health care agency, and you can get the same care for say $15/hour vs $25/hour that the agency would change. This allow you to stretch your benefits further are will allow you to put in LESS premium into your hybrid long term care insurance plan in the first place.
Can I use my benefits in other countries over seas?
Another unique feature of the Bright House Financial’s SmartCare product is it pays 100% international beneftis in cash as well as in the US. The other hybrid companies pay about 50% international beneftis.
Bright House Financial’s SmartCare comes with a 90 day elimination period like Minnesota Life vs both Nationwide and Lincoln Financial don’t have one. Bright House Financial is rated slightly lower than the other companies at AM Best rating of A vs A+.
Important features to consider
More Americans in their 50’s and 60’s are starting to consider hybrid life insurance with long term care products.
Statistics show that there were over 578,000 such policies sold in 2023. That was over 246,000 more than the number of hybrids sold in 2022. As you go shopping for a hybrid life insurance and long term care insurance combo, it’s important to keep in mind that not every hybrid is equal.
Products vary greatly on price points, features, flexibility, and benefits options. Below are some of the key factors that you should put into consideration when shopping around for the best hybrid long term care policies.
- Eligibility requirements – it’s important to study a policy’s eligibility requirements for benefits to be granted. Usually, a licensed health care practitioner must certify that the insured person has a severe cognitive impairment or cannot perform at least 2 of 6 Activities of Daily Living (ADLs) for at least 90 days or more. Keep in mind that you’ll need to complete the elimination period before benefits start rolling out.
Similar eligibility requirements also apply to traditional LTC insurance policies. - Monthly benefit amount – at the time of application, a hybrid policy owner can choose a fixed monthly benefit amount. The duration of benefits payout depends on the payout option selected at the time of buying the policy. You may choose to receive the maximum payable monthly benefit for as long as your LTC eligibility continues. You may also elect to take less than the full monthly benefit in order to receive payouts for a longer duration, or preserve the death benefit amount.
- Reimbursement vs cash indemnity benefit – policies may offer either a reimbursement or a cash indemnity benefit. To get cash, which is preferred, you must choose the right company!
With a reimbursement benefit, the policyholder will need evidence and approval of actual expenses before the monthly benefit payment can be granted. Examples include Lincoln MoneyGuard and OneAmerica’s AssetCare.
On the other hand, a cash indemnity benefit pays out the full monthly LTC benefit without asking the policyholder to submit receipts or other evidence of expenditure. Examples include Nationwide CareMatters II and Minnesota Life SecureCare.
Cash is King…
Cash indemnity hybrid long term care plans tend to offer more flexibility because you can use your benefits to pay informal caregivers, family caregivers, or take care of other expenses that may not be admissible under a reimbursement benefit arrangement.
- Taxation of benefits – benefits that are received are usually tax-free up to a certain level. The HIPAA (Health Insurance Portability and Accountability Act) set this level at $410 per day or $149,650 annually (as of 2024). To drill down more and learn more on the tax treatment and deductibility of HYBRID LTC, click here.
- Return of premium – many hybrid policy LTC riders do offer a 80-100% return of premiums paid (subject to a specified vesting schedule). This means if the policy owner intends to surrender the policy after premiums have been paid, they can secure most (if not all) of their money back.
- Inflation protection – some policies offer provisions for protecting the benefit payouts from inflation. These annual inflation riders may be simple or compound, and are available at 3 percent or 5 percent.
- Residual death benefit – some policies do pay a nominal death benefit (guaranteed minimum death benefit) even if the entire death benefit amount was used up paying for the policy owner’s long term care expenses. These options vary greatly from one policy to another and it’s important to pay close attention.
Hybrid LTC FAQs
What is a hybrid long term care insurance policy?
A hybrid policy blends the features of a traditional permanent life insurance policy with a long-term care rider. Its appeal to customers lies in its dual benefit: it covers long-term care expenses when needed or provides a death benefit. This dual nature counters the ‘use it or lose it’ drawback found in many standard LTC policies.
What companies offer Hybrid Long Term Care Insurance?
What are the benefits of hybrid long term care insurance?
- Premiums are guaranteed and cannot be raised in the future
- A death benefit is paid out to the policyholder’s heirs, whether or not they end up needing LTC coverage
- Underwriting requirements are less stringent compared to traditional LTC policies
What is the best hybrid long term care insurance policy?
The best hybrid policy is the one that adequately addresses your needs and morphs into your future planning. Some of the very best hybrid policies we have seen include OneAmerica’s State Life Asset Care, and the State Life Annuity Care II Series, among others. Most people find that they are happier receiving multiple custom quotes from different insurers and then choosing the one that best addresses their requirements.
How much does hybrid long term care insurance cost?
Contrary to conventional LTC insurance policies that require small premiums paid over a number of years, most hybrid LTC products are funded with a single lump sum upfront payment – usually to the tune of $50,000 or $150,000 per person. It’s worth noting that some LTC hybrid plans allow flexible premium payments such as paying the premium over five, seven, ten or 15 years.
How does hybrid LTC tax deduction work?
Benefits received from hybrid long term care are typically tax-free up to the greater of actual LTC expenses or the per diem rate established by Health Insurance Portability and Accountability Act. As of 2024, that amount was set at $410 per day.
A Short Personal Testimonial from a client who used LTC Tree to secure a hybrid long term care plan
“In the Winter of 2024, my husband James and I celebrated our 40th wedding anniversary. We were both in our early 60s, still bubbling with life’s energy, and were making plans for our retirement. Among our many discussions was one about our health, given that both our parents had faced significant health issues in their final years.
With that concern in mind, we decided to invest in a hybrid long-term care insurance policy and used LTC Tree. Friends had told us of its dual benefits – if we ever needed long-term care, the policy would cover our expenses, and if not, our children would receive a death benefit.
Two years later, James was diagnosed with early-onset Alzheimer’s. The world around me crumbled. Beyond the emotional trauma, the costs of care loomed large. Specialist visits, medications, and eventually, the possibility of assisted living or a nursing home. I’d heard stories of families depleting their life savings to manage these expenses.
But our foresight to invest in the hybrid policy became our financial lifesaver. The policy covered James’ home care expenses when he began to need daily assistance with tasks. Instead of draining our savings or selling our home, the insurance shouldered the burden. It provided not only financial relief but also the ability to choose the best care options for James without the shadow of monetary concerns.
As the years rolled on, and as James’ condition progressed, our policy ensured that he received the care he needed, from in-home support to a stay at a specialized memory care facility. I could still visit him daily, hold his hand, and cherish our moments, without the nagging worry of how to afford the next bill.
James passed away last winter. While the emotional void is profound, I take solace in the fact that we could provide him the best care possible without compromising our financial future or burdening our children.
Today, when friends or family ask about our experience, I often share our journey with the hybrid long-term care insurance. Not just as a wise financial tool but as an emotional cushion. A policy that, in the face of life’s unexpected challenges, allowed us to focus on what truly mattered – being there for each other.”
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