Question: How have baby boomers responded to the need to prepare for long term care expenses?

O’Brien: By and large, it seems that consumers–including baby boomers–are rejecting standalone LTC insurance due to the expense, especially considering that they hope never to need to use the coverage.

Consider the numbers from LIMRA: Standalone LTC insurance sales fell 23% in 2009; those sales have fallen in six out of the last seven years; and only 5 million people are estimated to have individual LTC insurance in force. This suggests that only a small portion of the 39 million baby boomers, who are rapidly approaching retirement, are insured for LTC.

Question: Is there a solution to LTC expenses that baby boomers will find more palatable?

O’Brien: The income opportunities provided by the income riders and withdrawal benefits of fixed and fixed indexed annuities solve multiple problems for consumers, including the need to prepare for LTC expenses. An annuity with an income rider solves the need for a reliable income that lasts as long as you do.

In addition, some annuities–called combination or hybrid annuities–will boost the guaranteed lifetime income payment by as much as 50% to 100% when certain LTC qualifications are met. In these products, even if the annuity value is ultimately exhausted, the owner will still receive continuing LTC payments from the carrier. These annuities require no out-of-pocket expense, and clients benefit whether or not they ultimately use the LTC benefit.

Fixed and fixed indexed annuities are well suited to this market need. The products provide no direct downside market risk; they have guaranteed rates of return; and they can provide guaranteed income for life–which can be used to cover health (and in some products, LTC) expenses, prescription drugs, food, housing, and transportation costs during the many years boomers expect to live in retirement.

Question: How should producers position a fixed or fixed indexed annuity with an income rider with a boomer?

O’Brien: Just mention these advantages too: No out-of-pocket expense. No direct downside risk. Guaranteed rates of return. Guaranteed income for life. Continued access to unused value. An increased payment to cover LTC expenses.

Kim O’Brien is executive director of the National Association for Fixed Annuities, Milwaukee, Wisc. Her e-mail address is kim@nafa.com.