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."

LTC Without The Nursing Home
To be sure, during a crisis most people are focused on short-term survival, not long-term planning. But there is a specific link between LTC and the coronavirus.

"One of the items that is repeated constantly on our current news cycle is the number of elderly individuals who are dying from Covid-19, especially due to outbreaks in nursing homes," Zovistoski said. LTC insurance is often used to pay for nursing-home care, he noted, yet some policies allow policyholders to receive long-term care at home instead, which most people prefer.

"LTC professionals need to educate potential clients even more about the home health-care benefit features within the policies," said Zovistoski. "The ultimate goal will be to keep clients in their homes, and out of the nursing homes, as long as possible."

Zovistoski also mentioned there are other ways clients can save money even if premiums rise. Some, he said, have opted to reduce the benefits within the policy —such as automatic coverage increases to keep up with inflation—in an attempt to keep premiums relatively fixed."

Will The End Of The Bull Market Affect LTC Insurance?
Still, the end of the 11-year bull market, and the concurrent low interest rates, could impact the LTC insurance market. In a press release, Jesse Slome, the AALTCI director, theorized that many hybrid policies had been sold in recent years by "stockbrokers and financial planners who found it easy to move their client's money from one asset to a linked-benefit product." He doubted many brokers will be calling their clients now, after recent portfolio declines.

At the same time, clients who are worried about asset declines may become attracted to stand-alone policies because they are usually more affordable in the short run.

On the other hand, market fluctuations may make no difference. LTC decisions tend to be motivated more by emotion than logic. "The majority of the reasons clients have or do not have interest in [LTC] products rests within emotion, education, or need," said Zovistoski. "The emotional aspect is probably the greatest force to compel someone to consider the product."

Sitting Tight
For the time being, Kimberly Foss, president and founder of Empyrion Wealth Management in Roseville, Calif., said most clients are sitting tight and not making any changes. "If the financial doldrums go on much longer," she said, "some may start reassessing their expenses and those in current good health may start taking a look at the premiums as a way to save money."

"It’s too early in the game for people to be thinking a whole lot about long-term anything," she added. "But as the market volatility subsides, and especially when life returns to a more normal pace, I expect that traditional LTC insurance policies will come back onto the radar for more clients."

As of recently, one leading provider of standalone LTC insurance is seeing no movement in clients' purchasing decisions, though there has been an uptick in curiosity.

"We have seen an increase in interest on our traditional LTC products, through both our individual and group offerings," said Larry Nisenson, chief commercial officer at Genworth's U.S. Life Insurance division. "Web traffic has been increasing in the last week or so."

Nisenson said people are concerned about how and where they'll receive care if they have a long-term care need. That's why they are actively looking for information about solutions. In addition, he said, Genworth maintains strong ties with state and federal authorities to "advocate for legislation that will make long-term-care insurance more affordable and accessible.”

Meanwhile, Gordon at MAGA is monitoring the effect of low interest rates on LTC pricing. "This is especially important for our existing clients with stand-alone policies because of the potential for a future rate increase," he said. "In good or bad economic times, LTC planning is something people need to look at."