Stand-alone long-term care insurance is not the only defense against unexpected health expenses
Hybrid insurance products are becoming more popular among buyers, especially given their ability to let policyholders unlock part of the death benefit or cash value for unforeseen long-term care expenses. With the rise in demand for these non-traditional products comes a fall in sales for another category: long-term care insurance.
“LIMRA reported in 2017 that stand-alone individual LTCi sales have dropped 60 percent since 2012,” wrote Roxanne Anderson of Ritter Insurance Marketing in InsuranceNewsNet magazine. “[R]esearch from this same organization shows that LTC combination product sales have been climbing over the last few years.”
Citing actuarial and consulting firm Milliman, Anderson said that in 2016, only 17 insurers were selling traditional policies, two of which accounted for some 50% of the sales. Figures from LIMRA, meanwhile, showed that around 20 carriers were offering life-combination products at the end of 2016, with new entrants continuing to appear in the space.
“The potential for LTCi sales is great,” she said, noting estimates that 52% of individuals in the US will require LTC services and support after age 65. But non-traditional LTCi solutions, aside from being reliable and popular, can help people avoid certain hurdles or barriers associated with traditional solutions. For example:
- Traditional LTCi carriers typically issue policies only up to age 79;
- Clients with certain pre-existing conditions are ineligible for LTCi; and
- Because traditional rates are gender- and age-based, women and older seniors can face steep premiums
“We’re talking an average annual premium of US$1,870 for a 55-year-old man and US$2,965 for a 55-year-old woman,” Anderson said, citing the American Association for Long-Term Care Insurance’s 2018 National Long-Term Care Insurance Price Index.
Despite the declines in sales and carriers of stand-alone long-term-care insurance solutions, she stressed that non-traditional products shouldn’t replace them. Carriers of traditional solutions have adapted their products to have rates that are more sustainable over time, considering low lapse and interest rates as well as claims data. And traditional LTCi products often provide their buyers with more benefits for their dollars than hybrid LTC solutions.
“[I]t really depends on what the individual can afford now and over time, their need or desire for (more) life coverage or guaranteed income, and whether they view their risk of needing LTCi like they view their risk of needing cell phone, car or homeowners insurance,” Anderson said.
