March 12, 2018

Hybrid insurance product emerges

Elaine Tumicki, Corporate Vice President of Insurance Research-Product, LIMRA

While state-collected data points to a clear decline in long-term care insurance sales, it does not account for sales of combination or hybrid policies that combine either life insurance or annuities with a long-term care component.

For example, a hybrid life insurance policy would pay out a death benefit early if a policyholder fell ill and needed long-term care.

However, benefits in such plans are typically lower and often don't protect against inflation, said Jesse Slome, executive director of the California-based American Association for Long-Term Care Insurance.

"The tradeoff is most of those products have a fixed amount [of coverage]," Slome said. "You buy at 65, and you get $5,000 a month of benefit. What will $5,000 a month get you when you're 90? We will have to wait and see."

Across the country, sales of hybrid policies, especially in the life insurance realm, have grown sharply, according to Windsor-based insurance and financial association LIMRA, which does not publish state-level data.

In 2015, the number of hybrid life plans sold eclipsed traditional long-term care policies for the first time, LIMRA data shows.

More insurers have stepped into the hybrid market in recent years, said LIMRA's Elaine Tumicki, corporate vice president of insurance research-product.

"The risk is a little bit easier for insurance companies to manage because it's a little bit more known what the maximum costs will be," Tumicki said.

While they've filled a gap left by long-term care insurance, Tumicki said there are still far more people approaching retirement age who lack any type of long-term care coverage.

"Most people would agree the problem is not solved," she said.

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