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Is a hybrid policy better for you than a long-term care policy?

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Increasingly, people who want to help ensure that they can pay for nursing home or assisted living care but don't feel that they can afford a long-term care insurance policy are turning to hybrid or combination policies. These insurance policies combine long-term care coverage with either a fixed annuity or a life insurance policy.

In fact the number of these policies has doubled just since 2008. As of last year, Americans had over $2.4 billion invested in them.

A hybrid policy has several advantages over traditional LTC insurance. First, it can earn interest, so it's an investment. Second, if you need some of the money sooner for other purposes, you can access it. Third, it can also serve as a life insurance policy.

However, these policies aren't necessarily the best choice for everyone. The up-front investment can be high, and you may not be able to touch the money for some time without a penalty.

If you do choose a hybrid policy, you want to determine whether you want to combine the LTC insurance with an annuity or a life insurance policy. This may depend on whether you want or need monthly income or are more interested in having a death benefit. Remember that, just with a stand-alone LTC policy that you purchase on your own, your medical history and pre-existing will be a factor in whether you qualify for a policy and how much it costs.

It's wise to talk with your financial advisor or another professional who can give you objective advice about whether one of these policies is preferable over a LTC policy or counting on your savings and investments for your care. It's best not to rely on the advice of someone who earns his or her living selling these policies to determine whether this is the best way to go.

Source: New York Times, "Hybrid Long-Term Care Policies Provide Cash and Leave Some Behind," John F. Wasik, March 04, 2016

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