Not long before the coronavirus pandemic rattled the economy, the American Association for Long-Term Care Insurance (AALTCI) announced a huge increase in the total amount of long-term care insurance benefits paid every year.

According to the Westlake Village, Calif.-based industry organization, the annual dollar amount of those payouts jumped by more than 35% over the preceding five years to $11 billion in 2019.

AALTCI often serves as a kind of cheerleader for the industry. But there's no denying that a growing number of Americans own this coverage, and the industry has responded by offering a greater number of options. Might the current economic slowdown derail this growing market?

A Greater Need
"We are all getting older, and the possibility of needing care is real for many people," said Brian Gordon, president of MAGA Ltd., a LTC specialist firm in Bannockburn, Ill. "In fact, by the age of 65, 70% of the population will need some type of long-term care. The problem of living a long life is a reality, and we will always have the need for LTC planning since the government has no plans to cover LTC in the near future."

He says many of his clients prefer traditional stand-alone policies, as opposed to the linked or hybrid alternatives. The premiums are relatively affordable, but there are downsides.

First, there have been steep annual increases as carriers struggle to cover costs (Gordon often recommends an advance payment option such as one that allows for a single pre-payment or a 10-year amortized schedule). Second, their underwriting standards tend to be rigorous; you have to be healthy enough to qualify. Finally, you may be paying for nothing because if the policyholder dies before ever filing an LTC claim, the premiums paid are forfeited.

That's why other clients favor the linked or hybrid variety, which basically attach LTC coverage to a prepaid life insurance plan or annuity. That way, whatever happens to the policyholder, something is paid back—either an LTC benefit or a death benefit, or both.

"The lion's share of our clients [are] opting for the hybrid policy because they like the guaranteed premiums and guaranteed disbursement," said Gordon, "whereas [with] the stand-alone policies you have to be prepared for future rate increases, and it has the use-it-or-lose-it [risk]."

Keep Clients Up-To-Speed
Because of so many variations, there is no one-size-fits-all approach. Indeed, some advisors assert that the self-quarantining during the coronavirus pandemic may be a good opportunity to get clients caught up on their options. They are home and practically a captive audience.

"Sitting at home during the self-quarantining is absolutely not the time to sell," stressed F. Michael Zovistoski, managing director at UHY Advisors NY, a fee-based advisory service headquartered in Albany, N.Y. "It is, however, the time to show compassion, build relationships, and let clients and others know that you care. Clients will remember how they were treated during this crisis and will be more willing to discuss strategies for mitigating long-term-care risk once everything settles down."

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