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About those hybrids...

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Packaging long-term care (benefits) with life insurance or annuity products might be a good idea, but it will not necessarily eliminate all of the risk typically associated with long-term care insurance (LTCI).

Laura Bazer and other credit analysts at Moody’s Investors Service gave that assessment in a recent analysis of the state of the LTCI market.

The analysts emphasized in the title and subtitle for the report as a whole that many providers have left the market and that the future of the sector is certain.

The analysts said insurers have tried to reduce risk by offering limited LTC benefits with “hybrid” or “combination” products.

A life or annuity hybrid might be able to limit product risk for the future by offering a more limited long-term care (LTC) benefit than an LTCI policy would offer, and the hybrid products can appeal to the kinds of consumers who worry about the idea of locking money away in a stand-alone LTCI policy with no cash value, the analysts said.

But consumers typically have to make large, upfront premium payments to buy the hybrid products and they may refuse to bite, the analysts warned.

“In addition, because competition for “combination” policies has risen, an increasing number of providers now offer extended benefit periods that span several years beyond the depletion of base plan values,” the analysts said.

Consumers do have to pay extra for an “extension of benefit rider” (EOB), but LTC hybrid products with an EOB rider “are riskier than those without the EOB feature, since there is less data about benefit utilization rates and claims experience for such policies at this time,” the analysts said.

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