Disability-To-LTC Conversion Policies Are Here To Stay
By Guy W. Bertsch
Some of todays individual income protection policies are designed to address a variety of incomes and life stages.
They do this in a hybrid design that provides income protection that can start early in the clients career, be upgraded as income rises and be converted to long term care protection during retirement.
Not a “flash in the pan,” these contracts represent a new generation of income protection insurance called “conversion” policies. These contracts evolve as people age and needs change, and they address underserved segments of the disability insurance market at the same time.
Producers should feel comfortable promoting these policies, especially if the producers are aware of how to overcome misconceptions about disability and LTC coverages. (See chart for tips.)
Given current demographics and trends, the timing couldnt be better for selling conversion policies. In fact, research estimates that more than 85% of the traditional high-income customers now own individual income protection coverage, but that fewer than 15% of middle-income professionals own such policies. The potential sales growth is estimated at $4 billion, based on analysis of U.S. Census data.
The industrys traditional disability income product was highly adapted to the needs of a niche market. By contrast, the newer conversion products respond to changes in the economy that affect typical American families.
For example, an estimated one-third of all families with children are single parents and 50% of U.S. households now depend on dual incomes. This suggests there is a growing need for an income product that meets the needs of a younger, more nontraditional audience–one that will experience a dramatic change in lifestyle if income should be lost or reduced due to disability.
Meanwhile, by 2025, its expected that there will be more than 78 million people aged 45 to 64. These individuals will have reached their peak earning years and will be concerned with protecting their financial assets going forward.