Glossary
Hybrid life/LTC policy, defined
A permanent contract that pairs a death benefit with a pool of money for extended personal care, so the owner draws on the benefit early if care is needed and heirs receive what is left if it is not.
In practice
It answers the objection to standalone care coverage: paying premiums for decades and getting nothing back. The premium is usually a single lump sum or a fixed schedule of around ten payments that the carrier cannot raise, and there is typically a return of premium option. Care benefits are paid as an acceleration of the death benefit, often with an extension rider that keeps paying after the face amount is used. The trade is cost: the same money in a standalone care policy buys a larger care benefit, and the same money in a plain life policy buys a larger death benefit. Underwriting is lighter than for standalone coverage in some products. Annuity-based versions exist for people who cannot qualify medically.
A worked example
Suppose a sixty-year-old pays a single $100,000 premium for a contract with a $150,000 death benefit and a care pool of $450,000 payable at $6,000 a month. If she needs four years of care she draws $288,000, which uses up the death benefit and then the extension; her heirs receive nothing, but the contract paid out far more than she put in. If she never needs care, her heirs receive $150,000. Hypothetical figures.
Applies to: Life InsuranceAnnuities