Life insurance and annuities with long-term care riders have far surpassed standalone LTC insurance policies in sales, with tens of millions of Americans aged 50 or older still lacking any coverage, according to LIMRA data.

Less than 7% of consumers over age 50 have LTC coverage, two experts from the industry research organization and its Secure Retirement Institute said in an analysis last week. Yet 52% of seniors 65 and older will need long-term services, according to the Department of Health and Human Services.

LTC sales charts

Standalone policies usually offer more robust benefits, but higher prices and carriers’ exits from the market over profitability concerns have cut sales by more than a half over the past five years, LIMRA says. Hybrid life policies and annuities have more than gobbled up the difference, with more than $4 billion in sales last year.

The gap in coverage remains, though. By 2040, LIMRA predicts 82 million Americans will be retired. Fewer than 40 million people aged 65 or above had left the labor force in 2016, according to labor participation rates from the Bureau of Labor Statistics.

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In light of the need and the demographics trends, clients and advisors aren’t discussing LTC enough, according to studies cited by HHS and private-sector experts on aging. Current sales fill some of the demand, but insurers will need to expand their offerings to tap the market, LIMRA says.

“A lot of the innovation in new life products has come from carriers that were already in the market. For annuity/LTC combination products, the market is a niche where only a handful of companies are actively offering products,” LIMRA researchers Todd Giesing and Elaine Tumicki wrote in an email.

“While sales have been on the rise, the number of carriers active in this market have declined slightly over the past few years.”

LONG-TERM TRENDS IN LONG-TERM CARE
LIMRA has been tracking LTC insurance sales since the early ‘90s, when few combination or hybrid products had hit the market, according to the researchers. The organization started measuring hybrid sales in 2006, and 20 to 25 firms now offer life insurance policies with LTC or chronic illness benefits.

The number of hybrid life policies sold first eclipsed purchases of standalone LTC policies in 2015, and their total premiums last year of $3.6 billion were nearly 16 times those of standalone LTC insurance, LIMRA says. Hybrid annuity premiums outpaced standalone premiums in 2014.

Some six out of 10 consumers say they would consider such combination products, according to the researchers. The hybrids offer greater flexibility than standalone policies, although the products’ costs and benefits vary too much to compare their prices against each other, say Giesing and Tumicki.

“While we don’t expect to see a rise in individual LTCI sales soon, combination products are a great way to fill the gap the declining individual long-term care insurance sales has left, while still meeting at least a portion of consumers’ long-term care needs,” according to their analysis.

Tobias Salinger

Tobias Salinger

Tobias Salinger is an associate editor of Financial Planning, On Wall Street and Bank Investment Consultant.