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What the heck is hybrid insurance?

Traditionally, different types of insurance — life, disability and long-term care, for example — have been bought separately on what Thomas Henske, certified financial planner and partner at Lenox Advisors, calls an "a la carte" basis.

A hybrid policy, on the other hand, "is really just combining all those products into one," he explained.

Why the bundling? Spiraling costs for long-term care insurance have prompted many insurance carriers to exit that market, but some "smart" ones have tacked on long-term care to life insurance policies, Henske said.

Insurance
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"What that has done for the consumer is, it has lowered cost dramatically," while lowering risk just as starkly for insurers, he said. "So it was a win-win."

Where can you find a hybrid policy? First, do some research online to get educated, said Henske. "There's enough information that's there to get a basic understanding of what these products are."

But at some point, you'll likely need to consult an insurance professional. Meet with one who has access to multiple carriers, said Henske, "because clients are going to have different needs, and you don't want to be speaking to someone who just represents one company."

The pros and cons of hybrid insurance plans? On the plus side of the equation, they offer "economies of scale."

"Think about it: In the world that we live in today, aren't we going to move towards ... where it's 'buy one product that has multiple solutions for the individual client?'" said Henske.

One downside concerns taxes. As an example, he noted that "having a hybrid insurance product inside of a trust is not always advantageous, because some of the benefits would then become taxable if they were ever payable to the client."

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There are several factors to consider before buying a hybrid policy. First, "get armed with where you are and where you need to be," said Henske. Then, go online to do a little research and sit with an insurance professional who isn't linked to just one company.

Lastly, he said, "when you're making the final purchase, make sure that your time horizon matches the time horizon of not only that product but the strength of the carrier you're choosing."

— By Kenneth Kiesnoski, associate editor