How To Be Burned By Long Term Care Insurance

It is easy to be burned whenever you are working with a contract type that you are not used to.

Last week I read, “You can cover long-term care with “combo” products” in the Chicago Sun-Times.  This is an example of why I have a problem with unlicensed  public figures giving advice on insurance matters.  They tend to give only one side of the story.

This story does not say anything that is incorrect.  It is true that LTCI premiums can get quite expensive.  A minimal LTCI policy for a 55-year-old often the same cost as Life insurance.  If someone waits to get LTCI until they are in their 70s, the premium can become cost prohibitive.

The author is right.  “Combo” or “Hybrid” plans can be used quite successfully for people who are declined for traditional LTCI or see no value in them.

What he did not point out is that many of these types of plans have limitations.  If you are going to use one of them in lieu of a traditional LTCI, make certain you read the fine print before you commit.

Last week, I was part of a webinar on one of these “combo” products.  It was an annuity that offered a LTCI rider.  Everything in their advertisement sounded too good to be true.  I wanted to see how the product worked before I recommended it. I learned that there are a couple of “catches” that are not mentioned in the sales literature.


Many of the “combo” plans have a time limit.  In the insurance industry these time limits are called “Waiting Periods.”  The plan that I investigated requires that the insurance company holds your money for 2 years before anything is paid for Long Term Care expenses.  If you have a stoke 6 months after you deposit your money, this plan will not pay anything towards your Long Term Care bills.

Many people rely on a LTCI or Accelerated Death Benefit rider on their Life insurance.  Those riders can differ from one insurance company to another.  Some act like true LTCI policies.  Some limit the amount of benefit that would be paid to a percent of your death benefit.  Others will only pay if you are diagnosed with a terminal illness.


Some “combo” plans say that they will more than double your money in the event you need Long Term Care.  What they do not say in their sales literature is that they restrict how they will pay you.  They will limit your annual payout.  The $18,000 a year that they would pay on a $100,000 deposit is almost enough to pay for a Home Care aide.  It falls far short of the over $72,000 a year cost of a semi-private room in a skilled nursing facility.


The Deficit Reduction Act of 2005 authorized states to develop plans that will partner with Medicaid.  Partnership plans allow people to shelter their assets from Medicaid’s Asset Test and Estate Recovery requirements.  These “combo” plans do not qualify for Partnership Plan status in most states.

If you run out of money and have to rely on Medicaid, you will be required to “spend down” your assets until you are able to pass Medicaid’s Asset Test in your state before Medicaid will pay you anything.

Once Medicaid does pay towards your Long Term Care, they will put a lien on your home.  Your spouse will be allowed to continue to live in the house but upon her passing, Medicaid will be reimbursed for what they paid during probate before your children will inherit your home.

Traditional LTCI is the only plan that offers Partnership Plan protections in most states.  “Combo” plans do not.


I partially agree with the article.  “Combo” or “Hybrid” plans are a good alternative to LTCI.  They follow the insurance agent’s motto, “Some insurance is better than no insurance.”  There is nothing wrong with “combo” plans, provided you know exactly what you have.

I have no problems recommending them for my clients who are unable to get traditional LTCI.  Those who have enough savings to pay for Long Term care expenses without having to rely on LTCI may find that these type of plans are nice luxuries to use if they want to maximize their qualified money.

My fear is that someone will use a “combo” plan rather than a true LTCI without learning how they work.  These “combo” plans are alternatives to LTCI only.  They do not provide the same level of protection.

“Combo” should only be used when there is a need for the life insurance or annuity or if you have been declined for a traditional LTCI.  They should never be used as a first option for Long Term Care coverage.

If you are going to use a Life insurance or Annuity “combo” plan, make certain you read the fine print in the policy when you get it.  If you rely on information you get from a sales brochure, insurance agent or member of the press, you run the risk of only knowing one side of the story.