Hybrid/Combination Plans

Combination Life/LTC, or Annuity/LTC 

An alternative to traditional long term care insurance plans described above are those that combine life insurance or annuities with long term care benefits. There are several insurance carriers that offer such plans. It’s very important to understand the distinction between this type of plan and a regular life insurance plan that offers long-term care acceleration of the death benefit. Combination plans, also known as Hybrid plans, are designed to be heavy in long-term care benefits, and not so much in life insurance death benefits. These plans typically have a guaranteed conservative life insurance death benefit that is paid if you pass away without using any long term care benefits, or they can operate just like a traditional long term care plan, with guaranteed benefits. Many of these plans include a feature that allows you to cancel the plan and receive a full refund of your premium. The premiums are most commonly made as a one-time single payment, although some plans allow you to pay in for 3-10 years. This may be an attractive option depending on your financial situation and personal preferences.

The key attraction of these plans is to provide solid long-term care coverage, while still being guaranteed that your money will be returned to you, one way or another. It will either be long-term care benefits, life insurance benefits, or you can cancel and get a full refund of your original premium. Some people have difficulty coming to terms with paying annual premiums on traditional long-term care plans for the rest of their life, concerned that they would lose the money if they passed away without needing care. Others view traditional long-term care plans as basic insurance, such as health insurance, and they are fine with that. It’s a personal decision, based on your own concerns and financial situation. These plans have been popular in a low interest rate environment, because it doesn’t cost much to park the money in a plan like this, for the type of benefits that are provided. Annuity combination plans are similar in many ways, but have the advantage of allowing 1035 exchanges from older annuities that may have significant taxable growth. If the annuity is used for long-term care expenses, taxes are avoided altogether.