The VUL policy delivers both upside and downside protection with annual lock-ins and a guaranteed minimum level of death and long-term-care benefits. Any growth is tax-deferred and will be income tax-free for qualified expenses, including care from family members, with benefits designed to better support non-facility care, Deichler adds.
In a recent Lincoln survey, 54% of financial professionals said clients avoid talking about long-term care because they think they can’t afford it. However, with the newest hybrid products, including Lincoln’s MoneyGuard, customers have the flexibility to fund their policy with a single, up-front payment or to pay over time and adjust when necessary.
“Consumers tend to wait until they are in their 50s or 60s before beginning their long-term-care planning,” Deichler says, “but with costs rising, it is important to start planning for long-term-care needs when they are younger and healthy.”
“Everyone has a parent who needs long-term care, but no one thinks it will be them,” says Todd Zeidenberg, president of Allied Wealth Partners in Guilford, Conn., who begins to discuss long-term care with clients when they reach age 50.
According to the U.S. Department of Health and Human Services, almost 70% of Americans turning 65 today will need some type of long-term care and 20% will likely need care for five or more years. Given that annual LTC costs can extend into the six figures, that’s a daunting prospect for many retirees.
According to Zeidenberg, “When the client turns 55, we start saying, ‘We really need to address this now.’ We also do meetings with kids and family members, which really unifies the advisor and client in life-centered financial planning.”
He says hybrid products give him the flexibility to provide a range of solutions. Recently he showed a client how a traditional policy would have cost $3,000 per month for the rest of the client’s life, while a hybrid product would cost him $10,000 per year for 10 years.
Larson says that more and more, “we’re finding hybrid products are morphing into flex pay products, and carriers are lengthening premium models. They can go out a lifetime. So if you compare a lifetime hybrid premium to traditional, they’re competitive.
“We’re also seeing a shift in younger clients being interested in hybrid LTC,” she says, such as clients in their mid-40s.
While some insurers are offering low-load products, hybrids have also increased commission payouts, Larson adds. “The payouts on hybrid are based on the high up-front single premium payment, and most products pay 7% to 9% commissions.” By contrast, the payouts for traditional long-term-care policies are around 65% of the annual premium, she says, adding that it’s a larger commission percentage but on a much smaller premium amount.
So for a single-premium hybrid product costing $100,000, a 7% commission would pay a rep $7,000, while first-year traditional premiums of $4,000 would pay a 65% commission of $2,600.
The Covid-19 pandemic and the ensuing nursing home crisis have also spurred the consumer desire for in-home care, which hybrid policies cover, says Jesse Slome, founder and president of the American Association for Long-Term Care Insurance. “What Covid has clearly done is said, ‘You’ll be so much better off at home.’ The shape of LTC going forward will focus much more on the ability to remain in place as people age and need care, and that’s what people want clearly. We all want it. No one wants to go into a facility.”