Long-Term Care Update: 6 Trends to Watch

Just when financial planners imagined long-term care coverage discussions couldn’t get any knottier, they managed to do so.

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Comments (16)
An otherwise comprehensive and even-handed article ended with a resounding thud. To shun "hybrids' because they offer no inflation protection is an inaccurate statement. ALL of the life-linked products offer inflation protection, including those from Genworth, Lincoln National, Pacific Life, State Life and the newer offerings from MassMutual and New York Life.
Posted by William B | Tuesday, September 02 2014 at 9:27AM ET
The comment about "Hybrids: being second rate because they offer no inflation is not only incorrect it is naive. A $300k (for example) life insurance policy that pays its benefits at the rate of up to $12,000 per monthand for ltc and any remaining to the heirs. Always a benfit, always a return on "invested" premiums. At least the clients get it, even though many advisors are still operating with blinders on.
Posted by Gene P | Tuesday, September 02 2014 at 11:07AM ET
I agree strongly with the comments by William B and Gene P, in that the article author's inferences and understanding of hybrid products is way off the truth path. The better hybrid carriers do indeed have inflation protection and many other items of high value, the biggest being one of GUARANTEES of pricing and features--something the standalone health-based products do not offer and about which the LTC market is being ruined. Believe me, when I got the news that my John Hancock block was being hit with a 40% price increase 4 years ago (and then the rest of my block with other carriers followed suit), it was not a pretty picture meeting with clients to modify their coverages. And we all know where it all went after that (round after round of increases; more certainly to follow!!) As pertains to the "supposed" easier underwriting of hybrid product, the author is so poorly informed and positioned on this point that it's nearly laughable. There's underwriting going on here for life insurance IN ADDITION to health. That's a tough combo. If he is referring to a few of the weaker carriers using Section 101(g) definitions, then the author might be correct.
Posted by Thomas C | Tuesday, September 02 2014 at 1:38PM ET
Not only do the life/LTC combo policies now offer inflation, they offer 5% while many LTC insurers limit inflation to only 3%. Plus, if you do not collect LTC benefits, the life policy pays out, which would be return of premium, no?
Posted by romeo r | Wednesday, September 03 2014 at 11:06AM ET
Not only do hybrid products offer inflation protection, but they generally perform best (more value for the premium) when they are run *without* inflation protection. That's the salient point.

Returning to traditional long-term care insurance, it is not true that these products no longer offer 5% compound-- they all do, by regulation.

It is also misleading to readers to cite an example of the one policyholder who cancelled his policy after a rate increase: statistically, about 85% of policyholders will accept a full rate increase while another 10% will modify their benefits and/or reduce their premium.

It is also misleading to cite the example of the one policyholder who had difficulty with his claim. Again, statistically, most claimants who are surveyed (95% to 97% according to the source) report being somewhat or very satisfied with their claim experience. Despite the sensationalism, LTC has a terrific claims story to tell.

In spite of the producer quoted in the story, however, it is not the "insurance companies starting to pay out" which underlie the rate increases we've seen. The main drivers by far have been persistency and interest rates. (To a lesser extent mortality and morbidity have begun to play an emerging role.)

If you have any further questions, please don't hesitate to ask. I co-wrote the book that financial advisors rely on.

Stephen D. Forman, CLTC
"Advisors Guide to Long-Term Care" 2nd Ed. National Underwriter
Posted by Stephen F | Thursday, September 04 2014 at 6:32PM ET
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