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Life Health > Long-Term Care Planning

The Best of Both Worlds

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Traditional individual long-term care (LTC) policy sales have been declining in recent years, but by no means has the need for a consumer solution faded. 

The aging population is swelling (the number of Americans aged 65 and older is expected to increase from 40 million to more than 71 million by 2030 ), and statistics show at least 70% of people over age 65 will require some form of long-term care services at some point in their lives.

With a high percentage of care delivered informally by family members, both planning for how care will be delivered as well as the financing of care is more critical than ever.   

While the need for long term care planning is evident, there can be hesitancy on a consumer’s part to purchase a product they may never need. This concern has given way to the rapid momentum of hybrid life/long-term care policies, which have seen dramatic sales growth since the mid-2000s. While these policies have been available since the late 1980s, today they are resonating in the market as they enable consumers to maintain control of their assets, while offering benefits whether or not long-term care is ever needed.

 A hybrid life/long-term care policy operates as a universal life insurance policy with long-term care riders, and helps clients leverage assets so they get more for their long-term care dollar.  Policyholders can feel confident that they have benefits regardless of whether they should need long-term care because their policy offers the option of: tax-advantaged long-term care benefits, an income tax-free death benefit, or a money back guarantee.  

While consumers are attracted to the many benefits of these hybrid policies, such as flexibility, asset control and predictability (many guarantee a set price for coverage, which allows policyholders a way to hedge against premium increases), insurers also see an upside. 

According to a recent study by Milliman Inc., natural hedge characteristics of hybrids actually reduce risk to the insurer when compared to the same long-term care insurance benefit dollars provided by stand-alone long-term care insurance .  In fact, across the five major components of risk within long-term care insurance, life combo (hybrid) volatility is typically reduced by 60% to 80% versus that seen on stand-alone long-term care insurance.

The ideal candidate for a hybrid life/long-term care policy is first and foremost someone who understands the need to plan for long-term care, but who also may be cautious in committing to paying for traditional long-term care insurance.  It is also usually someone close to, or preparing for, retirement and who already has their retirement plan largely in place. 

While these policies are often available in multi-pay options, most select single premium plans, making those with assets of $250,000 or more best-suited to purchase these policies.  Consumers who have no need for life insurance, or who do not have sufficient assets may be better off with a traditional long-term care policy.  

If you think a hybrid life/long-term care product might be right for your client, consider the following when seeking a policy to recommend:

  • Total coverage available for long term care.
  •  Monthly benefit available for long term care.
  • Guaranteed return of premium.
  • Inflation options.
  • Premium payment flexibility.

In addition to the policy, the provider themselves should be taken into account.  For example, keep in mind their commitment to, and length of time in the market, as well as their overall strength and stability.

With a sound hybrid policy in hand, clients can use a portion of the savings they have already set aside to get much more for their long-term care dollars, and immediately increase the protection for the rest of their portfolio – a win-win situation for everyone involved.


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