The sun is setting on stand-alone long-term care insurance, and hybrid products, also known as asset-based LTC, now rule the day. At least, that’s what sales figures from the US suggest.
“Whether because of client demand or greater awareness among financial professionals, the market for life combination LTC protection is booming,” noted Tracey Edgar, vice president of for sales, Care Solutions, at OneAmerica.
In a column for InsuranceNewsNet Magazine, Edgar said that the hybrid LTC protection market now consists of US$4 billion in annual premium with over 260,000 policies sold; based on LIMRA figures, that accounts for 80% of the overall market for individual LTC solutions. “These numbers include policies with chronic-illness and acceleration-only riders, as well as LTC extension products that offer a more robust LTC benefit solution,” she said.
She noted that the number of LTC-extension policies — plans that offer extension rather than acceleration of benefits for LTC expenses — are the fastest-growing segment of combination LTC products. Comparing 2016 to 2017, the number of LTC-extension policies sold swelled by 24%. In contrast, the number of LTC-acceleration policies increased by only 2%, while the number of chronic illness-acceleration policies declined by 3%.
There is also a growing trend toward recurring-premium options, a relatively recent product innovation that lets hybrid LTC buyers choose premium payment options including 10-year, 20-year, and even lifetime periods. Citing LIMRA, Edgar said recurring-premium policies account for nearly 90% of all asset-based LTC policies sold.
“People in the 40- to 50-year-old range tend to choose recurring-premium LTC protection,” said Brian Ott, an LTCi professional who works primarily with asset-based LTC products. “They’re still saving for retirement and they can do a limited-pay option that’s fully paid up in 10 or 20 years. Some clients also choose an option where they can make a deposit and make ongoing payments.”
That’s not to say that single-premium options, including annuity-based LTC protection, are not sought after. According to LTCI specialist Jack Lenenberg, older clients with an already-sizeable nest egg typically choose the single-payment option as they focus more on protecting rather than growing their assets in retirement. People with a lump sum from an inheritance or a buyout also find single-payment hybrid LTC products attractive to obtain LTC protection or, if they haven’t exhausted their benefits, leave a legacy to the next generation.
“Asset-based LTCi’s emphasis on guarantees is likely to resonate even stronger if uncertainty in today’s broader economic climate continues to emerge,” Edgar side. “The guarantees also provide a strong backdrop for advisors, regardless of what best-interest standard might emerge.”
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