The great thing about stand-alone long-term care insurance (LTCI) is that it can be an efficient way to help people prepare for long-term care (LTC) costs.
Bundling LTC protection in with life insurance, or with other post-retirement planning products, can be a great way to simplify the LTC planning process. Using a life or annuity combo product that will certainly pay a benefit to someone can lower the barriers of consumers who hate the idea of paying for LTCI coverage and never using the coverage.
Building the LTC benefits into a combo product may also help the insurer reduce the overall level of risk involved with writing the product.
But, because retirees are much more likely to die, or collect retirement income, than to use large amounts of LTC services, using combo products to LTC risk could result in people ending up with a relatively low level of LTC protection, or putting more money than they want into life insurance or annuities to get the desired level of LTC benefits.
LTCI marketers think that building awareness is the answer, but plenty of people who know all about LTCI and have other personal protection products still don’t buy LTCI.
In the long run, once insurers get past the current, temporary problems plaguing the stand-alone LTCI market (low rates, insurers’ frustration with old underwriting forecasts, Democrats’ anger that the insurers were nasty to Ted Kennedy), maybe the solution is to figure out how to combine LTC protection benefits with the sorts of semi-imaginary products that cost little or nothing to produce, make consumers happy today, and leave lots of room for charging prices high enough to fund the LTC benefits, in such a way that, to consumers, the LTC benefits seem like a footnote to an afterthought.
Regulators get very, very angry at insurers for increasing the premiums for LTCI coverage, for example, even though LTCI helped the quality of life of about 250,000 people in 2014.