Long Term Care Planning

Traditional long-term care insurance vs. Hybrid

Traditional long-term care insurance vs. Hybrid

In this article

— Last Updated May 27, 2022

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6 mins
Reviewed by
Eric Berkman

Guide Traditional long-term care insurance vs. Hybrid

— Last Updated May 27, 2022

Stephanie Wilson

Director of Operations


Reviewed by

Eric Berkman

Long-term care costs should be considered part of a comprehensive retirement plan. For a long time, people have purchased long-term care insurance to reduce their expenses.

However, several insurance products like hybrid insurance policies have emerged in the last decade that combine life coverage with expedited or prolonged long-term care benefits.

A long-term care insurance policy is an excellent way to safeguard your finances against the high cost of potential medical emergencies. To help you choose the policy that best fits your needs, we will compare the differences between the two main types of long-term care insurance available.

What is a traditional long-term care insurance policy?

Traditional long-term care insurance is a type of insurance that covers the cost of long-term care. It’s usually more expensive than hybrid policies, but it may have more flexibility in terms of coverage.

Traditional long-term care policies typically have lower deductibles and higher maximums for monthly premiums than hybrid plans do. Still, they may also have fewer age restrictions on eligibility or additional benefits like prescription drug coverage or ambulance service.

Hybrid long-term care policies are often sold as a type of life insurance, which means that you pay premiums for many years and then receive benefits if you become disabled and can no longer work.

In addition to paying for long-term care services that include home health aides, nursing homes, adult day care, and assisted living facilities, long-term care insurance may also provide benefits like transportation to appointments or personal care services at home.

What is a hybrid long-term care insurance policy?

A hybrid policy combines traditional long-term care insurance and a permanent life insurance policy. Hybrid policies can be confusing because they have multiple names and different features, but they all have one thing in common: they’re a mix between the two types of coverage.

There are two main types of hybrid policies:

  • A policy with a built-in inflation rider (the inflation factor will increase each year) or
  • A policy with a built-in nursing home rider (the monthly premium rate stays constant).

How are hybrid and traditional long-term care similar?

Hybrid and long-term care insurance policies have similar features. Tax-free payments for long-term care are generally made to the insured individual, and both types of insurance require the applicant to meet certain health and mental capacity thresholds. Additionally, a waiting or elimination period is often applied before reimbursing claims.

What are the differences?

Hybrid long-term insurance plans and traditional long-term care insurance are similar, yet they have key differences.

In terms of costs

While traditional long-term care insurance premiums may be high, the policy’s coverage may be tailored to meet various needs. Insurance companies may have limits on who is eligible for coverage under a hybrid policy’s cheaper rates.

Compared to hybrid plans, traditional long-term care insurance often has lower premiums. Hybrid insurance payments are often either in a single installment or over several years (typically not more than 10). Hybrid policies tend to have consistent payments, but long-term care insurance costs might increase over time.

Traditional health insurance policies may only be purchased directly from an insurance provider and are often more expensive than hybrid insurance plans.

Hybrid policies, on the other hand, are offered to consumers directly. Unlike Hybrid LTCI plans, which consider your current health state, traditional LTCI policies are determined by your age and health at the time of application.

Life insurance death benefits

Your hybrid insurance policy will pay you a death benefit in the case of your passing. Long-term care costs lower the death benefit, although many plans still pay out some money if the cost of care is more than the death benefit. This implies that your heirs will get a death benefit from the hybrid insurance policy even if you never use it for LTC.

Use it, or lose it

Hybrid policies often have a “use it or lose it” policy. Return of premium features are available with certain types of long-term care insurance policies, but they tend to be rather expensive and are thus seldom selected. you may lose the money you paid into your long-term care insurance policy if you don’t really utilize the benefits for long-term care.

The key benefit of conventional policies is that they provide you with more coverage options than hybrid plans, as you can buy insurance from many providers via a single digital platform.

This gives you more flexibility in picking a policy and estimating its cost and increases the likelihood that you’ll discover a plan that works for you.

Benefit payments and cash value

Hybrid policies often have lower premiums and lower benefit payments than traditional long-term care insurance. It also often includes a cash value component. Long-term care benefits are not exempt from taxes, but withdrawals of cash value from hybrid policies are.

Any gains on the cash value of a modified endowment contract (MEC) are considered to have been distributed before the principal amount and are subject to income taxes upon distribution. Long-term care insurance is useless from a monetary standpoint.

What are the benefits of hybrid and long-term care insurance?

Hybrid policies are combined.

Today’s policies are hybrid insurance policies, combining death benefits, cash value, and long-term care benefits. Hybrids are commonly known as “combination” or “comprehensive” policies because they provide you with all three types of coverage in one policy.

Hybrid plans have a higher cost of insurance than traditional long-term care insurance due to their specialized coverage requirements and high deductibles compared to other life insurance options available today.

Traditional long-term care insurance is more flexible.

Traditional long-term care insurance is known for its flexibility and wide range of optional features; the type of care you need is not limited. These policies offer you the choice of how much coverage you need and whether or not you want to pay premiums for a set amount of time (or until the death of your spouse).

Hybrid long-term care policies are similar to traditional ones in that they cover a wide range of optional features and services but with fewer options available than traditional policies. Hybrid plans don’t offer other types of coverage like hospitalization or surgery.

Hybrid policies can give you a wider range of coverage options.

  • Hybrid policies have a death benefit, cash value, and long-term care benefits.
  • You can choose a hybrid policy that meets your needs.
  • Hybrid policies are often more expensive than traditional policies.
  • Hybrids may be less flexible than traditional long-term care insurance packages because they have fewer options in terms of coverage types and deductibles (the amount you pay out of pocket before any benefits kick in).
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Disadvantages of hybrid vs. traditional long-term care insurance

If you’re 50 or older, the cost will be higher than traditional long-term care insurance because you’re more likely to make claims. Second, depending on your health and lifestyle choices, it may take longer for your premiums to pay off.

Traditional LTCI rate increases over time.

Annual premium increases for long-term care insurance tend to increase with time, which is a huge, unwelcome shock to a policy owner. Most policyholders with long-term care insurance believe their monthly premium is set for life.

You may not qualify for hybrid and traditional LTCI.

Hybrid insurance payments for long-term care might eat into the policy’s value, leaving less money for beneficiaries than planned. Furthermore, there is no guarantee you qualify yourself for hybrid LTCI. You will need to undergo underwriting and health screen exams to ensure that you qualify medically.

You may have an expensive LTCI plan you cant afford.

If you bought long-term care insurance years ago but cannot pay for it, you may be part of a “club” of unlucky individuals. You will probably forfeit all premium payments if you cancel your coverage. Additionally, traditional long-term plans do not offer a single premium, whereas hybrid policies do.

Hybrids use it or lose it policies.

When the cash value of hybrid insurance is used, both the long-term care benefit and the death benefit are forfeited. You also forfeit the hybrid policy’s cash benefits and death benefits if you use its long-term care benefits. The cost of a hybrid policy is usually three times that of traditional plans, but you don’t get three times the benefits because if you use one, you lose the other two.


What are the three types of long-term care insurance?

Traditional long-term care insurance, hybrid long-term care insurance, and life insurance with a long-term care rider are the three primary forms of long-term care insurance. Various coverage options come with their own set of advantages and disadvantages.

What is the most common type of long-term care?

Most people who need long-term care need assistance with their “activities of daily living,” which is another word for personal care. This long-term care coverage includes personal hygiene, getting dressed, grooming, using the restroom, eating, and mobility (such as getting out of bed and toileting).

Which insurance does not cover most long-term care costs?

Since Medicaid and private insurance often do not pay for long-term care expenses or any of the LTC-related charges, purchasing an LTC insurance policy may be wise if you anticipate the need for such protection.

Final Thoughts

Hybrid policies are a great option for people who want to combine the best features of traditional long-term care and term life insurance. They offer protection against the cost of long-term care services and can save you thousands of dollars. However, their “use it or lose it” policy can be a deal breaker for most people.

With traditional long-term care plans, you’ll get more long-term care benefits for less money, and your costs of care are covered. All life insurance premiums, including those for hybrids, are not deductible by the taxpayer, but traditional LTCI premiums are.

Stephanie Wilson


November 28, 2022

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