Combo Policies

Combo (or hybrid) policies are available in two general forms: 1) Combination life insurance-long term care insurance and 2) combination annuity-long term care insurance.  While there are variations, here are the most common forms of each:

Combination Life Insurance-Long Term Care Insurance: Guarantees that insured person/policy owner (or ultimately beneficiaries) will, at the very least, always get money back.  A single premium (typically $75,000-$150,000) is reallocated from existing assets to the insurance policy.  The reallocated assets should not be generating income that is needed for living expenses.  There are no further premiums and no possibility of future rate increases.

1. If the insured person dies without needing long term care services, the original premium (plus possibly a small additional amount) is paid to the beneficiary(ies) as a death benefit. OR:

2. If the insured person needs long term care services, between about 1.5 - 5 times the single premium becomes available to pay for care.  Optional inflation protection can increase this amount even more. OR:

3. If the policy owner decides the policy is no longer wanted, the entire single premium amount is refunded.

Reallocation of the premium does not change net worth at all.  The single premium amount that is moved to the combo insurance policy remains on the policy owner's balance sheet.  Note: The "insured person" and the "policy owner" are usually, but not always, the same person.

 Combination Annuity-Long Term Care Insurance: Similar to Combo Life Insurance-Long Term Care Insurance as above except that an annuity is used as the vehicle instead of life insurance.  It is most often a single-premium, fixed (as opposed to variable), deferred annuity with an embedded long term care benefit.

1. The remaining annuity account value becomes the death benefit.

2. The annuity owner has about 2-3 times the single premium to use for long term care services when those services are needed.

3. The annuity account value grows over time as does a fixed, deferred annuity, although typically at a slightly lower rate.

 Effective on 1/1/2010, provisions of The Pension Protection Act created unique tax-favored opportunities for combo policies.