Millions of Americans are living without the safety net of life insurance. Will hybridized policies build a bridge?
Key takeaways:
- Hybrid insurance policies combine the best of both whole-life and long-term care coverage in one package.
- Hybrid insurance policies have grown in popularity since the COVID-19 pandemic.
- Despite their long-term benefits, they’re generally more expensive. Consult with an insurance advisor before making any commitments.
The “life insurance gap” refers to the number of Americans who currently have no or insufficient life insurance. A recent LIMRA report reveals that 42% of the population—that’s 102 million people—either have no life insurance at all or need more than they currently have.
Just 46% of women and 57% of men report being covered, and the longer American lifespan introduces another concern for those without coverage: aging-based care.
What factors contribute to this broad lack of coverage, and will hybrid insurance policies help narrow this historic gap?
Read on to learn how hybrid insurance policies help you stay covered.
Reasons Behind the Life Insurance Gap
Skipping or delaying life insurance is often driven by common factors, including:
- Thinking there’s plenty of time to start a plan in the future or that it’s too late
- Considering life insurance an unnecessary expense (such as for those with no dependents)
- Believing that life insurance isn’t worth the expense
- Not completely understanding how life insurance works
Tackling this overall lack of consumer knowledge is key to closing insurance gaps. For example, not everyone knows that it’s wise to get life coverage in place ASAP. It becomes more expensive to secure the older we are, meaning it’s never too early to start.
Nor is it ever too late; even seniors can find coverage to get a plan underway in their later years.
Single people may have no dependents, but they may still leave surviving family members with medical bills and other costs after death, which life insurance can help pay for.
What’s more is that recent figures illustrate that the average monthly premium for a term life insurance plan is just $26 a month, quite a surprise for those believing life insurance premiums to cost a small fortune.
Insurance companies must remain committed to more effective public outreach and education to address these consumer concerns and work to reduce the life insurance gap.
However, hybrid insurance policies come into play as yet another way to close the insurance gap.
Explaining Hybrid Insurance Policies
You can think of hybrid insurance policies as coverage that provides the best of both life insurance and long-term care (LTC) insurance.
The costs of long-term care can be extremely high, meaning hybrid policies can be helpful when you consider the potential benefits:
- A death benefit when the policyholder dies
- Protecting life savings/retirement savings from being depleted by medical bills
- Payouts based on accelerated or early payments of a death benefit
- Financial help with LTC expenses, whether you need them at home or in an assisted facility
- Payouts can be monthly or as a lump sum
Consider, too, that hybrid premiums can be fixed from the beginning of the policy and may even skip waiting periods and deductibles (depending on the provider).
Another factor that seems to predict a greater interest in hybrid policies is an aging population. According to the AARP, as many as 7 in 10 Americans will require (and underestimate the costs of ) long-term care.
Additionally, the National Academy of Social Insurance projects a massive shortfall in long-term care providers (both familial and professional) within the next 15 years.
Ultimately, it’s clear that hybrid insurance policies could be particularly beneficial as the need for long-term care continues to increase and help becomes harder to find. But are they making any measurable difference in attracting policyholders?
The Data Behind Hybrid Insurance Policy Performance
The COVID-19 pandemic kicked off a surge of interest in hybrid policies among the general population and particularly among caregivers. Another key demographic for insurers—millennials—also began to pay more attention to hybrid insurance policies during this time.
Did this uptick in interest equate to increased sales? Some insurance watchdogs simply state that hybrid insurance policies have been growing in popularity. LIMRA was a bit more precise, noting in their August 2024 report a 5% increase in fixed universal life premiums year-over-year, which they say “was mainly driven by hybrid life/long-term care product sales.”
Another indicator of a respectable hybrid market is the number of providers currently offering this insurance. Prospective buyers can shop around for hybrid coverage at New York Life, Brighthouse, Northwestern Mutual, and Nationwide, among other sellers, which is another sign of definite demand.
But Why Aren’t More People Taking Out Hybrid Policies?
It essentially boils down to two things: not knowing that hybrid policies exist in the first place and their higher price point.
Hybrid insurance policies do cost more than standalone whole life or LTC insurance, since they’re offering double the coverage. We also can’t forget about inflation protection; some policies have it built in, while others require policyholders to pay more for it..
Consumers who take the time to dig deeper into hybrid insurance policies may also decide to forego them based on their longer elimination periods, the fact that only whole life is included, and the potential erosion of the death benefit due to long-term care payments.
Questions? Find Out If a Hybrid Insurance Policy Is Right for You
Ultimately, it remains to be seen just how effective hybrid policies will be in narrowing the life insurance gap. Whether they’re worthwhile or not depends on the consumer’s unique circumstances (both present and projected).
That’s why you should always seek professional advice from an experienced insurance provider who can match your current and future needs with a policy that works for you.
NICRIS is always here to help should you require more guidance on selecting life insurance. You can send us a message, call at (516) 544-0006, or drop by to visit us in person.