There are several combinations that make business sense
Insurers have long sought to develop products that adjust their benefits and premiums to match the needs of buyers as the buyers progress through life.
For example, insureds/owners should be able to specify their needs at some point during their lifetimes and thus have their changing needs be reflected in changing insurance packages.
The purpose of this discussion is to address several combinations that make business sense, and which are currently doable.
Transitional offerings such as critical illness insurance products that evolve into long term care insurance on or around retirement age are completely doable today without a need to address any special actuarial or legal (e.g., Section 7702B of the Internal Revenue Code) concerns.
A similar transitional offering that starts off as disability income insurance and transitions to LTC insurance is equally doable.
Although many buyers–and producers no less–would argue it is desirable to delay purchase until the time in life when one needs a particular kind of coverage, there are strong arguments for the transitional approach.
The strongest argument is the need to protect one’s insurability. That is one powerful reason to develop a life cycle approach to the purchase of insurance, and therefore, for insurers to offer such vehicles.
What would such an offering look like?
An insurance program would be designed by an agent or planner with the client, and the program would lay out the following.
Life insurance needs for the desired period of time. There is no reason why schedules can’t anticipate increasing needs over time. For sure, such programs can’t anticipate all kinds of changes, but they can anticipate key lifestyle events.
For example, insurance needs will increase at key life events, such as the birth of children, marriage (sometimes the marriage comes first) and grandchildren. Insurance needs for many might decrease at times (like retirement), although for others the need to fund estate taxes or perhaps their equivalent results in the need for increasing or second-to-die coverages.