Hybrid Policies

INSTEAD OF BUYING pure long-term-care insurance, you could purchase cash-value life insurance that offers long-term-care benefits. We discuss cash-value policies later in this chapter. If you need to pay for a nursing home, you could tap into the death benefit—and sometimes receive even more, depending on the policy—to cover long-term-care costs. If you don’t end up in a nursing home, the policy’s proceeds pass to your heirs.

Hybrid policies appeal to folks who hate the idea of paying years of premiums for long-term-care insurance, but never getting anything back. Sales of these policies have been picking up, even as demand for traditional long-term-care insurance has waned. Still, hybrid policies are a costly way to protect yourself. After all, you are buying life insurance at an advanced age, which is an expensive proposition, and yet you may not need life insurance at that juncture, because you don’t have dependents who would suffer financially if you died suddenly.

You can also purchase tax-deferred fixed annuities that have a long-term-care rider. If you don’t need long-term care, the money continues to collect interest. If care is needed, you can usually get access to a sum equal to some multiple of your original annuity investment. With the fixed annuity, you avoid buying life insurance you may not need—but you will likely be locking up a large sum that will then earn modest returns.

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