Product trends – hybrid policies and life Insurance riders
Clients who are hesitant to purchase long-term care or because they believe a policy will go unused may choose one of several new options to round out their coverage and protect retirement income. While variations are still relatively new, policies continue to evolve over time in response to these market changes.
Hybrid products allow clients to secure both life and long-term care coverage in a single policy. The policy’s total value – often upwards of $100,000 to $300,000 – must be funded up front. Clients who can afford the initial investment gain flexibility from being able to use funds from the policy cash values for long-term care if needed or as a death benefit for survivors if the need for care never arises. In the event that they require long-term care, the policy will pay a fixed monthly sum until funds are exhausted. If left unclaimed, or if funds remain in the policy after death, they are paid out to beneficiaries.
Alternatively, some carriers offer more conventional life insurance policies with provisions that free up funds for long-term care for the name insured, if necessary. One example is a policy rider that will pay out the life insurance policy’s face value over a set period of time – often sufficient to cover care needs for a few years. Similarly, there are some universal life insurance policies which can also provide long term-care benefits funded from the cash value build up.
Tips to discuss long-term care needs
Clients have likely already formed an opinion on long-term care products or have strong ideas about whether or not they’ll use coverage. Most people know someone – a family member or friend – who relied on long-term care and have seen how coverage benefits the family’s situation. Yet there are still some clients refuse to imagine they’ll require the care themselves.
I feel it’s important to convey to the client that long-term care planning isn’t about the probability of a medical event, it’s about the consequences of the event. The impact of a long-term care event can often add stress to finances and family relationships. Simply having to provide care for a few years can greatly impact financial security and devastate savings that have been earmarked for retirement or legacy purposes.
Use a modeling system to show how various likely scenarios impact the plan. Hypothetical forecasting structures can factor several variables – like long-term care costs, inflation and cost of living increases, stock market changes, etc. – and illustrate weak points within the portfolio. Clients will see the financial consequences are simply too great to leave financial plans unprotected from this risk factor.
Long-term care insurance is an increasingly relevant and helpful product to protect clients’ wellbeing against the financial consequences of a debilitating illness. Ongoing market trends and policy adaptations will continue to provide flexible options in response to market shifts.