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Standard vs hybrid life insurance: Which is better?



Standard life insurance has a single purpose – to provide death benefits to your beneficiaries. Hybrid life insurance combines long-term care insurance and life insurance into a single insurance. If you become disabled and cannot live independently, it covers the costs of your care, at home or in a facility. It does not cover medical costs, e.g. doctor visits, surgeries or prescription drugs that are normally covered by your health insurance.

How does hybrid life insurance work?

A hybrid policy combines elements of permanent life insurance with long-term care protection. If you buy a hybrid policy with, for example, $ 200,000 in benefits and die without the need for long-term care, the entire $ 200,000 benefit is paid to your beneficiaries. However, if you ever need long-term care, death benefits in your hybrid policy can be converted into cash to pay your long-term care costs. The death benefit that your beneficiaries may receive is reduced accordingly, dollar for dollar.

What are the benefits of hybrid life insurance?

Many people buy hybrid life insurance because it solves a big problem with long-term care insurance- if you never need long-term care, the money you spent on premiums is wasted. With a hybrid policy, if you die without the need for long-term care, your beneficiaries will receive the full amount of compensation. At the same time, you have some protection if you become disabled and need care. This type of insurance offers tax-free compensation for qualified long-term care costs as well as tax-free death benefits.

The benefits of hybrid life insurance include:

  • No risk of use-or-lose-it
  • Locked in premium rates
  • Less stringent medical insurance requirements in some cases
  • Cash benefit benefits are still offered by some plans ( unlike new traditional long-term care policies)
  • Prevents your property from being depleted of long-term care costs

What are the disadvantages of hybrid life insurance?

There are some disadvantages to hybrid life insurance:

  • You may need more money in advance to pay your premiums.
  • You receive fewer benefits for your insurance premiums than with regular life insurance or long-term care insurance.
  • Long-term care payments reduce the insurance's cash value and death benefit. If you need long-term care for a longer period of time, this can lead to your beneficiaries not having a death benefit.
  • You must meet the requirements for long-term care to receive benefits. This means that a licensed caregiver must certify that you are cognitively impaired or unable to perform two or more of the six daily activities for 90 days or more. These activities are eating, bathing, dressing, using the toilet, going from one place to another and maintaining bowel and bladder.
  • You must complete an elimination period (usually 90 days) before long-term care benefits begin.
  • You are only covered for the first five years of assisted living care.

There can be a number of factors to consider when choosing between standard and hybrid life insurance. Our agent is happy to review the pros and cons of both types of policies with you.


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