The basics
Asset-based long-term care,
explained simply.
Long-term care coverage that's tied to an asset you own, a life insurance policy or an annuity, so your money works for you whether you need care or not.
In one sentence
Use it for care, or leave it as a legacy.
Traditional long-term care insurance is a pure expense. Asset-based long-term care turns that expense into an asset. You fund a life insurance policy or annuity, and the insurer agrees to pay a multiple of that value for qualified long-term care.
If you need care, the policy pays. If you don't, the death benefit or account value goes to your family. Either way, your money isn't lost.
Three ways it pays off
- You need care: monthly benefits for home care, assisted living or a nursing home
- You never need care: a death benefit to your beneficiaries
- You change your mind: many designs return some or all of your premium
The two main types
Life-based or annuity-based
Hybrid life / LTC
A universal or whole life policy designed around long-term care. The death benefit can be accelerated for care, and many policies add a continuation rider that extends benefits for years after the death benefit is used.
Annuity / LTC
A fixed annuity with a long-term care benefit that can pay two to three times the account value for care. Often easier to qualify for, and a natural home for money sitting in CDs or an old annuity.
An example
One payment, three outcomes
A hypothetical 60-year-old woman in good health moves $100,000 from CDs into a single-premium hybrid life/LTC policy.
| What happens | What the policy might provide* |
|---|---|
| She needs care at 82 | A monthly care benefit from a long-term care pool that can be several times her premium, potentially for six years or more with a continuation rider |
| She never needs care | A death benefit to her children that's larger than her premium, generally income-tax-free |
| She needs the money back | Many designs return all or most of her premium if she surrenders the policy |
*Hypothetical and illustrative only. Actual benefits depend on age, health, gender, state, carrier and design. Ask for a personalized illustration.
How benefits start
The benefit triggers
- A licensed health care practitioner certifies you need help with two of six activities of daily living, or you have a severe cognitive impairment.
- A plan of care is written.
- You complete the elimination period (often 0–90 days).
- Benefits are paid monthly, by reimbursement of care costs or as a cash (indemnity) benefit, depending on the policy.
Questions about asset-based LTC
Is asset-based long-term care the same as hybrid long-term care?
Yes. Asset-based, hybrid, combination and linked-benefit long-term care all describe policies that pair long-term care benefits with life insurance or an annuity, so the money you put in still has value if you never need care.
How do I qualify for benefits?
Typically a licensed health care practitioner must certify that you can't perform at least two of six activities of daily living (bathing, dressing, eating, toileting, continence, transferring) for an expected 90 days, or that you have a severe cognitive impairment such as Alzheimer's. Most policies then have an elimination (waiting) period, often 0 to 90 days.
What if I never need care?
With a hybrid life/LTC policy, your beneficiaries receive the death benefit, generally income-tax-free. With an annuity/LTC policy, the account value stays yours or passes to your beneficiaries. Many designs also let you surrender the policy and get some or all of your premium back.
Who is asset-based LTC best for?
People roughly 45 to 75 with savings they'd like to protect, who want guaranteed costs and dislike the idea of paying premiums they may never use. It's especially popular with couples and with people repositioning CDs, old annuities or life insurance.
Are the benefits taxable?
Long-term care benefits from a tax-qualified policy are generally received income-tax-free up to IRS limits. Annuity/LTC benefits can be tax-free under the Pension Protection Act. Consult your tax professional about your situation.
Your next step
See your numbers before you decide anything.
A free, no-pressure review. We'll compare asset-based long-term care options from top-rated carriers side by side, including what happens if you never need care.