Interest in life combo products spikes

As the pandemic spread, images of nursing homes and assisted care facilities flooded the media. The sick and elderly were particularly vulnerable to this deadly virus and so many families were cut off from their parents and grandparents in the hopes of protecting them from exposure to COVID-19.

With this in mind, LIMRA surveyed more than 2,000 Americans to determine if the pandemic has shifted their thoughts about long-term care and insurance.

In January 2021, more than a quarter of Americans (26%) said it was very likely they would consider a life combination product (a life insurance policy with a long-term care insurance component) if they were shopping for life insurance. This is 50% higher than in 2019. Overall 6 in 10 consumers said it is at least somewhat likely they would consider a life combination product if shopping for life insurance (see chart below).

While Millennials expressed the most interest in life combination products—35% said it was extremely likely they would consider life combination products—Baby Boomers are decidedly less enthusiastic. Just 17% say it was extremely likely they would consider these products and nearly a third said it was not likely at all.

“Baby Boomers, who are approaching or in retirement, may not feel the need for life insurance or may mistakenly believe Medicare will cover LTC expenses,” said Karen Terry, senior research director. “Younger individuals, however, may find life combination products appealing because they mitigate the financial risk of dying unexpectedly and the costs of long-term care.”

The top five reasons people give for considering a combination life insurance product include:

  • Concern that LTC costs may deplete or exceed my savings: 35%
  • It is a more economical use of my current assets: 33%
  • Benefits will be paid even if I don’t incur LTC expenses: 29%
  • LTC insurance (on its own) is too expensive: 26%
  • I can’t afford two separate (life and LTC) policies – 25%

The study found consumers facing high levels of stress as caregivers for adult relatives and/or children showed the greatest interest in life combination products. More than a third (36%) of caregivers with high stress levels said they were very likely to consider buying a life combination product, compared with just 21% of those who said they had low stress levels.

“These consumers recognize better than anyone the demands of providing care for aging parents or other relatives with declining health,” noted Terry. “Their experiences as caregivers make life combination products, which offer financial protection against their own long-term care needs, that much more attractive.”

Consumers are attracted to life combinations products for a number of reasons. From a product design standpoint, consumers place the greatest value on having the option to receive care at home or a facility. The study found 6 in 10 consumers would prefer to receive long-term care at home (unconditionally or until they have to move to a facility). This preference increases among older consumers.

Life combination products offer consumers the ability to address multiple financial risks they face as they age. According to the U.S. Department of Health and Human Services, someone turning 65 today has almost a 70% chance of needing some type of LTC services and support in their remaining years. Life combination products can cover the costs of LTC so that a family’s savings and financial security are not put in jeopardy. It’s just another way life insurance protects a family’s financial future.

LIMRA is leading the Help Protect Our Families campaign, an industrywide effort to raise awareness about the importance of life insurance and help carriers and distributors address the growing coverage gap in the United States.

21 COMMENTS

  1. I participate in a few consumer forums (mostly about Medicare) but someone asked about these combo plans.

    I call them Swiss Army Knife because they are supposed to cover almost anything. My impression is they don't really live up to the hype, but I am not an LTC guy so I really don't know.

    Someone (agent) mentioned the underwriting is more lax vs a straight LTC policy, so a person could be declined for LTC insurance but approved for a combo plan.

    True or false?

    It is my perception that the policy language in a combo plan might be more strict vs a straight LTC policy. In other words, the LTC policy might honor a claim that is denied by a combo plan.

    Is the LTC benefit baked into the policy or added as a rider? Does the normal 2 yr contestable period for life also track the LTC benefit?

    I probably have more questions but this is a start.

  2. somarco

    I participate in a few consumer forums (mostly about Medicare) but someone asked about these combo plans.

    I call them Swiss Army Knife because they are supposed to cover almost anything. My impression is they don't really live up to the hype, but I am not an LTC guy so I really don't know.

    Someone (agent) mentioned the underwriting is more lax vs a straight LTC policy, so a person could be declined for LTC insurance but approved for a combo plan.

    True or false?

    It is my perception that the policy language in a combo plan might be more strict vs a straight LTC policy. In other words, the LTC policy might honor a claim that is denied by a combo plan.

    Is the LTC benefit baked into the policy or added as a rider? Does the normal 2 yr contestable period for life also track the LTC benefit?

    I probably have more questions but this is a start.

    Bob,

    Underwriting can be easier, can be harder. Depends on the specific applicant’s health history and the specific underwriter.

    The benefit triggers are the same with all policies, traditional and hybrid, that adhere to IRC 7702(b)

    There is a 2 year period to contest a claim.

    The riders are:
    Acceleration of Death Benefit
    Extension of Benefit
    Inflation Protection

    There are some very good policies available today.

  3. ltcadviser

    Bob,

    Underwriting can be easier, can be harder. Depends on the specific applicant’s health history and the specific underwriter.

    The benefit triggers are the same with all policies, traditional and hybrid, that adhere to IRC 7702(b)

    There is a 2 year period to contest a claim.

    The riders are:
    Acceleration of Death Benefit
    Extension of Benefit
    Inflation Protection

    There are some very good policies available today.

    And THIS is why I leave this arena to folks like you.

    Thanks, Jack!

  4. Bob, generally speaking, the hybrid products are the wave of the future in LTC protection. As Jack pointed out, benefit triggers are the same if the policy falls under 7702(b).

    But understand that there are different "combo plans" out there.

    Some are designed to mimic traditional LTCI coverage as much as possible, such as LFGs MoneyGuard. The underwriting on these is very similar to traditional LTCI. Its essentially a UL chassis, but the benefits are focused on LTC and provide a seperate benefit pool for the LTC benefits. The focus is not the DB/CV.

    Then there are Life Policies that are a life policy first, and LTC protection second. Some of these fall under 7702, others do not. Some of these use a separate benefit pool, others use the DB. Some of these charge extra for the LTC/Chronic Rider, others do not.

    The main danger is if the impairments are required to be "permanent" or not. Most LTC claims are not for the rest of ones life, especially initial claims. But many non 7702 policies require the impairment to be permanent for the rest of their life, per doctors expectations. That provision excludes many possible LTC claims.

    All 7702 policies do not require the impairments to be permanent. But with the others you have to read the details. More and more life carriers are removing the requirement of permanent impairment. But most non 7702 policies still require it.

    So if you give just 1 piece of advice to people considering this, tell them to make sure permanent impairment is not required for claims to be paid.

  5. somarco

    I call them Swiss Army Knife

    i hear a lot of agents & even wholesalers use this swiss army knife terminology & many times the agent & client dont realize that the more they use 1 of the tools on the swiss army knife, they are also wearing down or eliminating the other tools in the swiss army knife. I hear agents sometime say you can use your hybrid accelerated death benefit for LTC costs & for death benefit & for supplemental retirement. That really isnt an accurate depiction as it is more fair to say "or" not "and". If I take distributions in my 60s to supplement retirement, I am also reducing the not only the cash value but also the death benefit & the Accelerated Death benefit for Chronic Illness. It wont be there for "LTC type expenses" if I have emptied the benefit from over using the other tools in the swiss army knife.

  6. Allen Trent

    many times the agent & client dont realize that the more they use 1 of the tools on the swiss army knife, they are also wearing down or eliminating the other tools in the swiss army knife.

    Thanks for the info.

    Years ago I wrote life insurance, annuities and DI but that was not my primary focus. As each of these lines became more complicated I realized there was a need for me to decide what I wanted to be when I grew up. Those 3 lines, and later the LTC market, are (to me at least) extremely complicated. An agent can quickly find themselves in over their head and make a big mess of it.

    When someone asks for a life insurance quote, I will only quote term, standard rates. No funny stuff. No guessing if the person is preferred, super-preferred or immortal.

    Perhaps that is why I have not taken an application in probably a dozen years.

    When CI policies first came on the scene most were in fact term life insurance with a CI rider.

    And most, or at least the ones I saw, were garbage. Lot's of weasel language that would allow them to deny a claim. If they did pay a claim the DB was reduced by an equal amount.

    If the policy covered heart, cancer, stroke and you had a "qualifying" stroke the claim was paid (lump sum) and the CI rider was terminated.

    I really saw a need for CI but most were life policies that COULD result in the claim benefit being taxable. One carrier (Omaha??) had a true CI plan on a health insurance chassis. Great product (at least I thought so) but it was hard to compete with CI on a life chassis because the MOO premium was so much higher.

    Underwriting was challenging including having the agent collect a specimen at POS.

    Thanks @Allen Trent , @scagnt83 and @ltcadviser for your input. Just a few reasons why this forum is such a great resource for agents who are not afraid to ask and willing to learn from the masters.

  7. somarco

    Thanks for the info.

    Years ago I wrote life insurance, annuities and DI but that was not my primary focus. As each of these lines became more complicated I realized there was a need for me to decide what I wanted to be when I grew up. Those 3 lines, and later the LTC market, are (to me at least) extremely complicated. An agent can quickly find themselves in over their head and make a big mess of it.

    When someone asks for a life insurance quote, I will only quote term, standard rates. No funny stuff. No guessing if the person is preferred, super-preferred or immortal.

    Perhaps that is why I have not taken an application in probably a dozen years.

    When CI policies first came on the scene most were in fact term life insurance with a CI rider.

    And most, or at least the ones I saw, were garbage. Lot's of weasel language that would allow them to deny a claim. If they did pay a claim the DB was reduced by an equal amount.

    If the policy covered heart, cancer, stroke and you had a "qualifying" stroke the claim was paid (lump sum) and the CI rider was terminated.

    I really saw a need for CI but most were life policies that COULD result in the claim benefit being taxable. One carrier (Omaha??) had a true CI plan on a health insurance chassis. Great product (at least I thought so) but it was hard to compete with CI on a life chassis because the MOO premium was so much higher.

    Underwriting was challenging including having the agent collect a specimen at POS.

    Thanks @Allen Trent , @scagnt83 and @ltcadviser for your input. Just a few reasons why this forum is such a great resource for agents who are not afraid to ask and willing to learn from the masters.

    Bob,

    LTC is so easy. In comparison, Medicare supplement and Medicare advantage plans, that stuff is complicated

  8. ltcadviser

    Bob,

    LTC is so easy. In comparison, Medicare supplement and Medicare advantage plans, that stuff is complicated

    MA plans are complicated and a PITA. That's why I stick with Medigap, the simple stuff.

    Most of my sales have a short gestation period, 60 days or less and most are not underwritten. Low . . . hanging . . . fruit . . .

    Plus I don't have a $50,000 website like you do . . .

    But thanks for all the feedback!

  9. somarco

    MA plans are complicated and a PITA. That's why I stick with Medigap, the simple stuff.

    Most of my sales have a short gestation period, 60 days or less and most are not underwritten. Low . . . hanging . . . fruit . . .

    Plus I don't have a $50,000 website like you do . . .

    But thanks for all the feedback!

    LTC is short gestation and low hanging fruit too.

  10. Interest in combo products is spiking in a large part because a ton of life agents would much rather sell them than to deal with real LTC insurance, so that's all they're presenting. The 7702b products are the best hybrids, and for the most part are good products, if more expensive than traditional LTC. The 101g plans – the chronic illness accelerated benefit plans – are inferior. The unfortunate part is that most consumers who wind up buying a hybrid plan aren't being educated about the LTC Partnership, and don't understand how the accelerated benefit plans actually work at claim time. In many cases they're paying more for inferior coverage.

  11. kpbdy99

    Interest in combo products is spiking in a large part because a ton of life agents would much rather sell them than to deal with real LTC insurance, so that's all they're presenting. The 7702b products are the best hybrids, and for the most part are good products, if more expensive than traditional LTC. The 101g plans – the chronic illness accelerated benefit plans – are inferior. The unfortunate part is that most consumers who wind up buying a hybrid plan aren't being educated about the LTC Partnership, and don't understand how the accelerated benefit plans actually work at claim time. In many cases they're paying more for inferior coverage.

    agree on most everything you said. only item i wonder about is the blanket statement that 7702b are for sure better than 101g.

    dont 7702b plans require you to 1st accelerate your life insurance death benefit before gaining access to the extension of LTC benefits? for most nursing home stays or needs for care, most are short term. wouldnt a 4% 101g plan have more benefit per month than most 7702b for those shorter needs. wouldnt 7702b only play out better for the longer stays of more than 2 years or so when a person would ever get into the extension of benefits of the 7702g?

    I am more of a novice on this topic, but the way I understood the Extension of benefits plans, they are only for sure superior if the person has longer than average claim need.

  12. Allen Trent

    I am more of a novice on this topic, but the way I understood the Extension of benefits plans, they are only for sure superior if the person has longer than average claim need.

    Well, remember we are doing long term care planning here. Not short term care planning or average stay in a nursing home care planning. 🙂

  13. ltcadviser

    Well, remember we are doing long term care planning here. Not short term care planning or average stay in a nursing home care planning. 🙂

    True. Fair enough & great point. My only thought is many dont offer as much monthly benefit that the 4% ADB CIA does in some cases.

    I still wonder if stand alone LTC & separate no lapse UL/IUL life insurance policy can work in some of those situations for similar premiums

  14. Allen Trent

    True. Fair enough & great point. My only thought is many dont offer as much monthly benefit that the 4% ADB CIA does in some cases.

    I still wonder if stand alone LTC & separate no lapse UL/IUL life insurance policy can work in some of those situations for similar premiums

    Similar premiums today, yes. Similar premiums 10-20 years from now, no.

    I think we are at a point in history that the premium difference is about the same, possibly even skewed higher for the traditional route.

    Its hard to compare the two options though, because of the guaranteed utilization of the hybrid solution. Most people dont mind paying extra if they are guaranteed to utilize the benefits at some point, especially if it provides a cash value or return of premium. Its a mindset of dollars being used vs. dollars being spent.

  15. scagnt83

    Similar premiums today, yes. Similar premiums 10-20 years from now, no.

    I think we are at a point in history that the premium difference is about the same, possibly even skewed higher for the traditional route.

    Its hard to compare the two options though, because of the guaranteed utilization of the hybrid solution. Most people dont mind paying extra if they are guaranteed to utilize the benefits at some point, especially if it provides a cash value or return of premium. Its a mindset of dollars being used vs. dollars being spent.

    Yup, that makes sense. I struggle with the extension of benefit hybrid compared to Acceleration of death benefit only. Saw a client recently considering the 2 options. The face on the ADB CIA was $250k with 4% monthly, so it could kick out $10k for 25 months. the extension of benefit product was $4167 per month for 6 years on like a $100k face policy with added $200k of LTC dollars after 100k exhausted.

    Considering the extension of benefit required the death benefit to be accelerated 1st before getting access to the bucket of LTC dollars, after 25 months, the extension of benefit policy would have only paid out $100k & another 3 years to get to a total of $250k .

    It just didnt seem to add much in total potential claim for the same dollars of premium for a total potential of $300k of claim dollars compare to $250k. Possibly, the rep did something wrong in their illustrations & the extension of benefit product should have provided more per month.

  16. Allen Trent

    Yup, that makes sense. I struggle with the extension of benefit hybrid compared to Acceleration of death benefit only. Saw a client recently considering the 2 options. The face on the ADB CIA was $250k with 4% monthly, so it could kick out $10k for 25 months. the extension of benefit product was $4167 per month for 6 years on like a $100k face policy with added $200k of LTC dollars after 100k exhausted.

    Considering the extension of benefit required the death benefit to be accelerated 1st before getting access to the bucket of LTC dollars, after 25 months, the extension of benefit policy would have only paid out $100k & another 3 years to get to a total of $250k .

    It just didnt seem to add much in total potential claim for the same dollars of premium for a total potential of $300k of claim dollars compare to $250k. Possibly, the rep did something wrong in their illustrations & the extension of benefit product should have provided more per month.

    Companies are charging 25-33% in top of the GUL premium for the 4% ADB rider. If I am paying $10000 a year in premium for x amount of death benefit that my estate owns, do I really want or need to pay 30% more premium for simply the right to accelerate the death benefit before death. The net amount at risk is still the same with or without the ADB rider and it is a decreasing net amount at risk the longer I live. My estate will get the death benefit when I die. I would definitely rather buy a living benefit policy with extension of benefits rider AND 5% compound inflation protection on the pool. The compound inflation factors are the key to the hybrids, especially when you get 5% compound. Now I own an increasing benefit policy to keep up with rising health care costs.

  17. ltcadviser

    If I am paying $10000 a year in premium for x amount of death benefit that my estate owns, do I really want or need to pay 30% more premium for simply the right to accelerate the death benefit before death. The net amount at risk is still the same with or without the ADB rider and it is a decreasing net amount at risk the longer I live.

    Do communicate that in those terms to a client?

    I agree 100% and have made that point to both advisors and clients and I normally get blank stares/silence.

    It's like they don't understand that LTC is about asset protection and a GUL, accelerated or not, is essentially a wash at the start that only gets worse.

  18. Tahoe Ray

    Do communicate that in those terms to a client?

    I agree 100% and have made that point to both advisors and clients and I normally get blank stares/silence.

    It's like they don't understand that LTC is about asset protection and a GUL, accelerated or not, is essentially a wash at the start that only gets worse.

    Yes, I told a guy yesterday to not buy the LTC Rider with Nationwide for a $1,000,000 15 Pay GUL. He was shocked when he saw how much the GUL premium got reduced once I removed the LTC Rider. He could buy so much more LTC benefits in a separate policy with the freed up premium in addition to the million dollar policy he wanted.

  19. Imo, it is not an apples to apples comparison. Also, paying for a Rider on a life policy is quickly becoming an antiquated thing.

    A better comparison would be a Chronic Rider that does not require permanent impairment, and does not add extra cost, or significant extra cost. Ameritas/AIG/NA/etc.

    But even doing an apples to apples comparison with Riders is close to impossible now. Some act exactly the same, but most have their own unique pros/cons. Especially when you are comparing a WL rider vs. GUL rider vs. IUL rider.

    You can make product to product comparisons (exact carrier/product vs carrier/product). But blanket statements about suitability of hybrid vs. Rider will almost never be an accurate statement.

    —-

    A lot depends on the expected LTC need and likelihood of utilization, and the clients objectives.

    Jack approaches this as "Long Term Care Planning". But many clients and advisors approach it as "asset protection".

    The goals of the two approaches are different. Just like the goals of a hybridLTC vs. Life/w Rider are different. If your sole focus is LTC benefits, you will always look at the Rider solution in a negative way. But if your focus is on comprehensive asset protection that is situation specific, then you start to see uses for the Riders in many situations.

    LTC Benefit:
    The hybrid policy will always pay more LTC benefits per dollar of premium.

    Death Benefit:
    The Rider policy will pay 3x-5x more in Death Benefit if LTC Rider is not used.
    The hybrid policy is essentially a return of premium death benefit.

    Cash Value:
    Hybrid policy is essentially a return of premium CV.
    A WL/Rider can provide 2%-4% growth of premiums paid. Same with IUL/Rider.

    So if a client feels they are likely to use LTC benefits, a hybrid policy is most often best.
    If a client is uncertain about the likelihood of using LTC benefits, then a Rider can often be a good fit as it provides better alternative options if LTC benefits are not used.

SHARE
Previous articleTech startup Get-A-Quote launches as lead source for insurance agents
Next articleSeniors increasingly customize Medicare insurance to fit lifestyles