Stand-alone vs. hybrid long-term care insurance

The longer people live, the more chance they’ll need some form of long-term care (LTC). LTC involves more than just the place where they receive care. It includes a variety of services and supports designed to help people live as independently and safely as possible when they can no longer do so on their own.

While it may seem as if LTC should be covered by insurance you already have, most people will need a specific way to fund these potential expenses, such as long-term care insurance.

When it comes to long-term care insurance, 2 of the most common options are stand-alone and hybrid policies. Both types provide funds to help you pay for LTC expenses; however, how you fund them and what you get from them varies drastically.

Understanding these differences can help you determine the best option to meet your unique planning needs.

Stand-alone long-term care insurance

Stand-alone, or traditional, policies work like other insurance coverage where you pay a premium for the life of the policy and make claims for covered services as needed.¹

These policies are typically cheaper than hybrid policies and may even offer the option to purchase additional coverage in the future; however, the premium and LTC benefit can also be changed by the insurance company. And keep in mind that if you stop making your premium payments, you could lose coverage.

With stand-alone policies, if you never need LTC, you have no way to recover the premiums you’ve paid — you basically use it or lose it.

Hybrid long-term care policies

A hybrid policy combines long-term care coverage with a life insurance benefit.

These policies allow you to pay a specified amount of premium — either as a lump sum or over a period of time — in exchange for a way to help pay for supplementary long-term care supports and services. If you never need LTC, or use only a portion of the LTC benefit, the remaining death benefit can be passed to your loved ones as an inheritance.

Advantages and disadvantages of a hybrid LTC policy

Hybrid policies have several advantages that may make them a good fit for you.

First, because the unused death benefit is paid to your beneficiaries, hybrid policies eliminate the “use it or lose it” problem that stand-alone LTC policies have. Also, the premiums on hybrid policies are guaranteed not to increase.

And if the hybrid policy offers a cash-indemnity benefit, such as the ones offered by Nationwide®, they’ll allow you to pay for informal care from family members or friends, giving you more options for remaining in your own home as you age.

But hybrid policies also have a number of disadvantages that you should consider before purchasing, including their tendency to be more expensive than stand-alone policies.

Which long-term care policy is right for you?

Planning for potential LTC costs now can give you more freedom and flexibility regarding the type of care you receive later on. So whether you prefer the lower costs available with a stand-alone policy or like the freedom and predictability of a hybrid policy, there’s an option out there that can help you plan for the future with confidence. 

[1] “Understanding Long-Term Care Insurance,” Kim Painter, AARP (Feb. 6, 2024).