Barry J. Fisher Paradigm Insurance Marketing

There is a quiet yet perceptible “buzz” in the life, annuity and long-term care insurance business.  Slowly but surely the premium being generated in the linked (asset based) long-term care insurance arena has been sneaking-up on traditional product sales. By linked or asset based LTCi I’m referring to life insurance products with accelerated benefit riders for chronic illness and/or annuity products with some sort of enhanced payout in the event of a qualified long-term care event.  Examples of the former include Genworth’s TLC, LincolnFinancial’s MoneyGuard, Nationwide’s Ultimate UL, and State Life’s (formerly Golden Rule)Asset Care (many others exist).   On the annuity side of the house, State Life’s Annuity Care is currently available in California with others on the way including Genworth and Mutual of Omaha.

There are a number of different headlines wrapped up in these products that you might want to consider:

• The Pension Protection Act (PPA) of 2006, beginning in 2010, allows for tax-free withdrawals from annuities with qualified long-term care (QLTC) benefits. In other words, if a policyholder that has a QLTC single premium deferred annuity (SPDA) suffers a chronic illness, (unable to perform 2 of 6 activities of daily living or have a severe cognitive impairment), they can access a benefit from their annuity without paying income tax on their gain.
• The vast majority of in-force annuities don’t have qualified long-term care riders expect to see a mass movement (1035 Exchange) to them.  There are currently $875 billion dollars in SPDA money up for grabs; does anyone smell an opportunity here?
• Expect annuity products with qualified long-term care benefits to have simplified underwriting. The current State Life Annuity Care product has a fairly short list of “knock-out” questions, that if answered “NO”, means that the applicant can qualify for the basic annuity/QLTC coverage plus extension riders for more coverage.  There will be many variations on this theme.
• Life products, annual and single premium, with accelerated benefits for chronic illness will provide new opportunities for clients trying to have it all; life insurance for their heirs but also access to benefits in case they need care.

The client profile for linked products differs from that of traditional long-term care insurance. Generally older (late 60’s early 70’s), these folks have most likely looked at long-term care insurance before and didn’t buy for any number of reasons.  In many cases a life or annuity based long-term care solution may be a second chance to provide some leverage against the risk.  Suffice it to say buyers of asset based solutions will generally have a long-term care “nest egg” sitting quietly in an under performing investment (CD, money market account) as a “just in case I need care” fund. By repositioning this nest egg the client can create three to six times leverage for a long-term care event.  In the meantime their principal is safe and they maintain access to it.

One of the big challenges for agents will be helping clients choose which product is suitable for their specific needs.  All three, life, annuity and traditional long-term care, are three path’s to long-term care security. However, they are not mutually exclusive. Different solutions will appeal to clients at different life stages. You may find that your 30 something prospects will want an annual premium term or U.L product with a chronic illness ABR. When they reach their40’s and early 50’s they may purchase a traditional LTCi product.  In their 60’s and 70’s they may add to their coverage with an annuity or single premium life LTCi combo.

The big change will be that agents will not be able to hide in their narrow product specialties. Clients will expect you to be fluent in long-term care planning and the varied solutions available to them.  And you can expect us to help you with the full array of traditional and asset based products.  Register today for our April 30^th webinar on What’s Hot & What’s Not In Long-Term Care Insurance. We will be reviewing the current lay of the land and what you can expect in the months and years ahead.  We look forward to talking to you then.

barry@paradigmins.com