In an article that was published in the National Underwriter & Health magazine and also made available online Robert Grubka, vice president of variable annuity business for Lincoln Financial Group (LNC), writes about the growing need for these types of products. Baby Boomers by the droves are passing the age of 60 and heading full speed towards retirement.
According to results from the 2006 third annual Lincoln Long Life Survey, “66% of respondents said they do not have any LTC insurance, and only 26% have even considered purchasing a policy.” Scary numbers when you consider that in 2004 the average annual cost of nursing home care was $70,000 according to the Congressional Budget Office. It’s no mystery that this number will increase and put nursing homes out of reach for many elderly people.
The idea behind the annuity and long-term care product is to enable people to pay for their LTC premiums by using part of their annuity proceeds. Of course the type of annuity; variable, fixed or equity-indexed will be important in this discussion. Grubka writes:
“What would an annuity-LTC insurance product look like? It could be a single-premium fixed annuity, which would accumulate assets from the general account to fund LTC insurance premiums and claims. Or it could have a variable annuity chassis, which potentially would generate cash values through the subaccounts to fund LTC insurance.”
I believe this type of product would be more appealing to people who would normally not consider purchasing a stand-alone LTC policy. How would you like to see this type of product structured and do you think it would appeal to many people?
Andrew,
Currently, there are some combination products that have an annuity or life insurance as the base policy, and some type of long term care benefits available as a rider.
When analyzing these products, in my opinion, the big issue is "Opportunity Cost".
The premiums for the Life/LTC combo products and the Annuity/LTC combo products are not worth the benefits offered in the policy.
In nearly every case that I've examined, it would make more sense for the consumer to keep his/her money, invest in a non-insurance product, and use a portion of the return on that investment to buy a sold long term care policy.
Scott A. Olson, CLTC
http://www.ltcinsuranceshopper.com/
Posted by: Scott A. Olson, CLTC | April 4, 2007 9:37 AM | Permalink to Comment