Should I get hybrid long-term care insurance?

If you can afford the additional expense, hybrid long-term care policies can help you cover the costs of assisted living care and preserve your assets for your family.

Headshot of Policygenius editor Nupur GambhirAmanda Shih author photo


Nupur Gambhir

Nupur Gambhir

Senior Editor & Licensed Life Insurance Expert

Nupur Gambhir is a licensed life, health, and disability insurance expert and a former senior editor at Policygenius. Her insurance expertise has been featured in Bloomberg News, Forbes Advisor, CNET, Fortune, Slate, Real Simple, Lifehacker, The Financial Gym, and the end-of-life planning service Cake.

&Amanda Shih

Amanda Shih

Editor & Licensed Life Insurance Expert

Amanda Shih is a licensed life, disability, and health insurance expert and a former editor at Policygenius, where she covered life insurance and disability insurance. Her expertise has appeared in Slate, Lifehacker, Little Spoon, and J.D. Power.

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A traditional life insurance policy pays a death benefit to your beneficiaries when you die. But insurers also offer riders that can put the death benefit toward financial support while you’re alive. 

Hybrid long-term care policies combine the long-term care rider with a traditional life insurance policy to pay for your care if you are unable to live independently. The rider covers in-home care, such as nurses or aides, or a stay at a medical facility.

While a hybrid long-term care policy is costlier than standalone life insurance coverage, for some people, it can be a fundamental part of estate planning. If you want to pass your assets to your heirs and can afford the policy, getting hybrid life insurance can mitigate the risk of depleting your savings to pay for care.

Key takeaways

  • A hybrid long term care policy is a traditional life insurance policy with a long-term care rider.

  • Hybrid life insurance covers the costs of assisted living if you need daily care.

  • Payments permanently decrease the death benefit and are only available for up to five years.

  • The cost of assisted living care is high — a private room in a nursing home costs as much as $105,850 a year.

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What is hybrid long-term care insurance?

A hybrid long-term care policy is a traditional life insurance policy with a long-term care rider. The rider gives you access to part of the death benefit to pay for professional care if you can no longer care for yourself. Funds are withdrawn and paid out to your service providers — like a nursing home or at-home care provider — instead of your beneficiaries.

Hybrid life insurance ensures that your estate isn’t depleted by the costs of your care and that your heirs can still receive their inheritance when you die.

To activate the long-term care rider, you must meet your insurer’s definition of disability, which means you can’t independently perform two of the six activities of daily living (or ADL). [1]

The six activities of daily living are:

  • Bathing

  • Eating

  • Getting dressed

  • Maintaining bowel or bladder continence

  • Using the toilet

  • Walking from one place to another

While the long-term care rider withdraws from the death benefit to cover your assisted living costs, it won’t cover costs that would normally be covered by your health insurance, such as doctors’ visits, prescriptions, or surgeries.

How much does assisted care cost?

Assisted care can cost tens of thousands every year and it’s often not covered by health insurance. According to a study by Genworth, a long-term care insurance provider, here are the annual costs for the following services: [2]  

  • Homemaker services: $53,768

  • Home health aide: $54,912

  • Adult day care: $19,240

  • Assisted living facility: $51,600

  • Semi-private room in nursing home facility: $93,075

  • Private room in a nursing home facility: $105,850

With inflation, these costs are expected to rise. Prices rose by about 3.4% in almost every category between 2019 and 2020. In just 10 years, Genworth expects these same services to cost thousands more:

  • Homemaker services in 2031: $74,427

  • Home health aid in 2031: $76,011

  • Adult day care in 2031: $26,633

  • Assisted living facility in 2031: $71,426

  • Semi-private room in nursing home facility in 2031: $128,838

  • Private room in a nursing home facility in 2031: $146,521

There’s one caveat to using a long-term care rider: it only covers the first five years of assisted living care. After that, your assets, a standalone long-term care insurance policy, or Medicaid would cover care expenses.

Who should get hybrid long-term care insurance?

Whether you should buy a hybrid long-term care policy depends on your financial circumstances. After age 65, 69% of Americans will require assisted care for an average of three years. Twenty percent will require care for more than five years. [3]  

If you don’t have the savings to fund both assisted care and an inheritance for your loved ones, a long-term care rider can protect your heirs from debt and secure their financial future.

How much does hybrid long-term care insurance cost?

The cost of life insurance with a long-term care rider varies depending on your insurer, age, and other factors. A 2019 study by AALTCI found that the average annual premium for a healthy, 55-year-old couple was $3,050. Individually, a 55-year-old woman would pay $2,050 per year and a man would pay $2,700 per year. [4]

While many riders can be added on to your life insurance policy for a flat additional fee, long-term care riders are priced as a separate insurance product. As you age and your health worsens, the rider gets costlier.

Even though you may not need it for another 40 years, it’s best to buy a hybrid policy when you’re younger. Though less common, young people can find themselves unexpectedly requiring assisted care, and buying early secures a cost-effective rate.

What are the best hybrid long-term care policies?

Many whole life, term life and guaranteed life insurance policies offer the option to add a long-term care rider when you buy coverage. Some insurers require you to buy a minimum amount of coverage to qualify for the rider — usually at least $100,000 in life insurance coverage.

Can you use Medicaid to pay for long-term care?

Medicaid will cover long-term care expenses, but you might not be able to qualify right away. To qualify for Medicaid, you need to make below a certain income — usually below 133% to 138% of the federal poverty level — and cannot exceed a maximum limit in owned assets. [5]  

When applying for Medicaid, you’ll need to release financial documentation from the past five years to the Department of Social Services. This is referred to as the look-back period and affects whether you receive benefits. They’ll also consider any assets you transferred out of your name in those five years.

Long-term care riders only pay out for the first five years of disability, but if you plan ahead, Medicaid can pick up where your hybrid insurance plan leaves off. You’ll need to carry out a Medicaid asset spend down

What is a Medicaid asset spend-down?

If your assets exceed Medicaid’s eligibility maximum, you can “spend them down” and decrease your net worth to meet Medicaid’s eligibility criteria. 

There are a few ways to spend down your assets:

  • Make home or auto improvements that are considered investments

  • Pay off outstanding debts

  • Gift your assets to family members (you’ll owe a gift tax on gifts greater than $16,000) [6]

  • Open an irrevocable Medicaid trust and transfer countable assets into it

What is a countable asset?

Countable assets are capped for Medicaid eligibility and may need to be a part of your Medicaid asset spend-down plan for the cost of care to be covered. These include:

  • Savings and checking accounts

  • CDs and money market accounts

  • Stocks

  • Bonds

  • Real estate that is not your primary residence

What are non-countable assets?

Your non-countable assets do not need to be considered in your Medicaid asset spend-down plan. These include:

  • Your car

  • Your primary residence (varies by state and depends on the home’s value)

  • Retirement accounts, such as IRA or 401(k)

  • Pre-paid funeral or cremation

  • Some life insurance policies

  • Personal belongings

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Alternatives to hybrid long-term care insurance

If you don’t opt for a hybrid long-term care policy, there are other ways to pay for assisted living or other care expenses, though they come with their own pros and cons. 

  • Standalone long-term care insurance won’t deplete the death benefit for your beneficiaries and it may offer coverage for a longer period. But, policies are much costlier than long-term care riders.

  • Medicaid will pay for your care if your income and assets qualify you from the get-go. However, if you’re not already receiving care, the program will also choose a care provider for you.

  • Self-funding your long-term care using your savings or other assets will save you money on premiums, but it can be risky. You’ll decrease funds you could otherwise pass to your heirs, and you may need care for longer than your budget allows.

Planning ahead is pivotal for long-term care, and even more so if you plan to use Medicaid to pay for some of those expenses. Whether you opt for a long-term care rider or a standalone long-term care policy, talk to a financial advisor early on so you can cover your care while protecting your heirs.

Frequently asked questions

How does hybrid long-term care insurance work?

A hybrid LTC policy combines a traditional life insurance policy with a long-term care rider that gives you access to death benefit funds to pay for assisted care if you need it.

How much does hybrid life insurance cost?

Your premiums depend on your age, health, and other personal factors. Average annual premiums for a 55-year-old couple without complex health issues are $3,050 per year.

Should you buy hybrid long-term care insurance?

If you want to cover the cost of assisted care without depleting your assets or asking family for assistance, a hybrid long-term care policy may be a good option.