We constantly hear about a shrinking long-term care insurance market, but the reality is the market is growing. There are more options available than ever before to help protect consumers and their families from the high cost of long-term care (LTC) expenses. This is great news for clients, their families and their advisors. But how do advisors navigate through the options available and help ensure their clients get the solution or solutions they need for their specific care desires and circumstances?
Know The Options
Standalone LTC Insurance: The old standby has suffered through a reputation crisis as many carriers have raised rates and removed options. However, the ability to pay a health insurance like premium is an option that may suit many clients despite the lack of guarantees and the potential that the benefits may never be used. While most policies are issued with a lifetime premium schedule, the annual outlays are often lower than options which come with a base life insurance or annuity product.
Life/LTC Combination Products: During the past two years, LTC solutions that are attached to a life insurance base product have outsold the standalone LTC insurance products, according to LIMRA. While these policies provide a death benefit if care is not necessary, they do tend to have higher initial premium costs to account for these additional benefits. These policies are designed for clients who would prefer to fund their LTC plan over a shorter time frame and who have a need for a death benefit for a surviving spouse or their heirs should care not be needed. In addition, many of these solutions offer return of premium options and are fully guaranteed which adds to the certainty of premiums and benefits.
Annuity LTC Riders: Sales of these riders continue to grow and give protection for LTC expenses with the ability to annuitize should care not be necessary. Recently, impaired risk annuities for clients that have an existing LTC need have emerged as a solution. This option is available for those who may have not planned for this risk or may not qualify for coverage due to an existing medical need.
Short-Term Care Insurance: Recently, sales of these policies have increased dramatically as clients have realized that some coverage is better than none. These policies tend to be of a shorter duration, hence the name, of less than 2 years. They are often discussed and purchased along with a Medicare Supplement purchase.
Having The Talk
A recent Lincoln Financial study found that a majority of consumers want to speak with their advisor about their long-term care risks. As advisors have these discussions with their clients and walk through all of the product types available, determining the appropriate solution will require clients to move beyond the mindset of care probabilities—which is greater than 50 percent. Instead, clients need to understand the impact of the costs that care can have on a couple, an extended family or on an individual’s retirement plans in the face of longevity. It’s estimated a consumer turning 65 today will incur on average $266,000 in long-term services and support costs, should they require future formal care, not accounting for inflation.