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Life/LTCI combo products: two types of protection rolled into one.

In 2006, the first wave of baby boomers turned 60.According to a recent carrier demographic study, baby boomers make up 27.5 percent of the U.S. population, which translates to more than 77 million people. With many of them approaching retirement age, the overall costs of long term care are expected to skyrocket. Under a traditional long term care insurance (LTCI) policy, policyholders pay an annual premium for coverage that will pay for care they may need in the future.

With an annual price ranging from $2,500 to $5,000, consumers may find it tough to pay for coverage that may never be used. But the situation can be a double-edged sword--as the cost of care rises, consumers without LTCI must decide if they can self-insure.

As a result of declining sales, coupled with the continued need to protect against the tremendous financial strain an uninsured long term care claim can present, more insurers are now offering a new product: a life insurance policy with an "accelerated benefits rider" that promises to pay out all or part of the death benefit should the policyholder need it for long term care. Depending on its terms, a $500,000 life insurance policy might pay between $200,000 and $500,000--or even $1 million toward the costs of a nursing home, as well as, perhaps, in-home care and assisted living. The amount paid as a long term care benefit from the life policy is later deducted from the death benefit that beneficiaries will receive when the policyholder dies.

This combined approach attempts to address the consumer concern, "What if I never need the long term care coverage?" If the policy owner never has a long term care need, then the death benefit of the life policy remains intact.

Combining LTCI with the death benefit in a universal life policy costs more than a standalone life policy, but there is a payoff either way. If your client goes into a nursing home, they collect. If they don't need that care, there's still cash for their heirs. Plus, universal life policies often establish a premium that's guaranteed to at least maintain the basic benefit, although it may not be enough to build a cash value. This eliminates the issue of ever-rising rates on LTCI.

Life/LTCI combo products are also available on whole life policies. Be aware that whole and universal life policies are more expensive than term life, since they also act as savings or investment vehicles, building up cash values. Some variable universal life and term life policies may offer long term care riders, as well.

Sales opportunities lie with prospects for Section 1035 exchanges, middle-aged consumers, and women, who constitute up to two-thirds of life/LTCI combination product purchasers.

When faced with the dilemma of cost or the fear that they may never need to use their LTCI policy, life/LTCI combo products can offer prospects a flexible, affordable, and comprehensive option.


Chris Salamon is vice president of life product management for Crump Life Insurance Services. He can be reached at 973-461-2149.

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Title Annotation:COMBO PRODUCTS
Author:Salamon, Chris
Publication:Agent's Sales Journal
Date:Jul 1, 2009
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