The Hybrid Life and Long-Term Care Policy

Benjamin Haas |


  • The US Department of Health and Human Services states that approximately 70% of people turning age 65 can expect to use some form of long-term careduring their lives. This is due to becoming disabled in at least two activities of daily living or being cognitively impaired. Yet according to the American Association for Long-Term Care Insurance, only about 8 million have any such protection (of 76 million baby boomers).
  • I hear two common arguments against having insurance as a retiree. First, why have life insurance when I don’t owe anyone anything. Second, why pay for long-term care insurance if I may never need to use it. Enter a life policy with an accelerated benefits rider.

Where the CFP® sees the fit:

  • Those that have already accumulated cash value in life insurance policies over their lifetime and are still healthy enough to transfer this value into a new policy with added benefits of long-term care coverage.
  • Those who have the discretionary cash flow or cash reserve to afford to transfer this risk to an insurer. Specifically, retirees who don’t plan to fully spend their required distributions from their qualified plans.
  • Anyone looking to preserve assets for their heirs as part of a legacy plan

The strategy:

  • Long-term care insurance works like this: You pay an annual premium, and if you need long-term care due to age or illness, the policy pays out a daily or monthly benefit. If you die without needing long-term care, you’ve “wasted” the premiums. As a way to counter that, so-called hybrid policies have become more popular. These policies combine long-term care insurance with permanent life insurance policies. In the hybrid scenario, a policyholder would withdraw funds (within limits) from the policy when they are needed for long-term care. And if the policyholder dies without having needed expensive long-term care, the heirs receive a death benefit — therefore the premiums paid into the policy are never “wasted.”

Additional notes:

  • This is insurance. So you must be healthy enough in the eyes of an insurer to obtain coverage.
  • There’s a common misconception that “Medicare covers long-term care.” Most long-term care isn't medical care; rather it is help with basic personal tasks of everyday life, sometimes called activities of daily living. Medicare doesn’t cover long-term care (also called custodial care), if that's the only care you need. Most nursing home care is custodial care.

Bottom line:

Heads, you live a long and healthy life and don’t need long-term care and there’s a death benefit for your heirs. Tails, you need long-term care benefits and an insurance company reduces your death benefit dollar for dollar to help pay for those expenses. In many ways this is a win-win strategy within a financial plan.


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Securities offered through LPL Financial, Member FINRA and SIPC. Investment advice offered through U.S. Financial Advisors, a registered investment advisor. U.S. Financial Advisors and Haas Financial Group are separate entities from LPL Financial.

This material contains only general description and strategies for the use of a hybrid life and long term care policy. This content should not be considered a substitute for individual financial advice. If you need more information or would like personal advice you may contact our office.