What You Need to Know
- Life-LTC hybrids are still hot.
- Insurers are putting more focus on how couples share benefits.
- Caregiver support is becoming an industry in its own right.
Insurers may be treating long-term care risk with a high level of caution.
Investors may still view insurers with large amounts of long-term care risk on their books as potential sources of terrifying radioactive financial contagion.
But advisors know that long-term care risk is coming at their clients, their own parents and other loved ones now, with no respect for insurers’ or investors’ fear.
Christine Benz, Morningstar’s director of personal finance and retirement planning, overcame the terror Wednesday and mentioned long-term care at Morningstar’s annual conference.
“There are not any good answers,” she said, according to an article about the conference by Ginger Szala. “Long-term care insurance is quite troubled.”
Rate Increase Fatigue
One sign of the troubles: More holders of stand-alone long-term care insurance policies are responding to big premium increases by dropping their coverage or cutting coverage levels.
In the past, long-term care insurance policyholders were famous for understanding the value of their policies well and holding on to their benefits with an iron grip.
Only about 1% to 3% of policyholders would respond to big rate increases by ending premium payments and accepting nonforfeiture coverage levels, according to Jesse Slome, director of the American Association for Long-Term Care Insurance.
Today, he said, 10% to 20% respond by cutting off premium payments, and 20% to 30% respond by shifting to lower levels of benefits.
About 50% to 60% of policyholders choose to keep their original policy benefit levels and pay the increased premium, he said.
Some insurers and service providers are still doing what they can to fight the good fight.
Here’s are three ways companies are moving forward.
1. Insurers are still trying to put products in your clients’ hands.
Companies such as Thrivent, Mutual of Omaha and National Guardian Life continue to sell stand-alone long-term care insurance.
Securian Financial and Lincoln Financial recently released updated versions of life-LTC hybrid products.
Securian has unveiled the SecureCare III product, which combines long-term care benefits with a whole life insurance policy.
The whole policy is nonparticipating, meaning that the holder will not get dividends that are based on the policy claims experience. Earlier versions of the SecureCare products were based on universal life policies.
“Changing the chassis helps simplify the product, satisfying a key industry-wide request from financial professionals and consumers alike,” Securian said in the product launch announcement.
The new policy offers policyholders the ability to change their minds and tap the policy value through three return-of-premium options. One, for example, can provide a 100% premium refund for consumers who have met vesting period requirements and cancel their policies.
Consumers who want more LTC benefits can choose a return-of-premium option that limits them to getting the guaranteed cash value of the policy if they cancel it.
Purchasers can also choose whether to pay for the policy with one premium or spread the premium payments over a period ranging from five to 15 years.
The long-term care benefits period duration can range from four years to eight years.