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Long Term Care Riders Can Be Added to Annuity Products


Depending on your age, you may have seen your parents, grandparents and even great-grandparents live a long life.  So you know that there is a good possibility that you will live to a ripe old age.  Many of your elderly relatives and neighbors have probably required some type of long term care along the way, either temporarily or permanently.  Long term care costs are expensive and it can be difficult to ensure that you don’t run out of money in retirement.  An annuity product that includes a long term care rider might help to solve both of those potential financial issues.  That’s why these products have become increasingly popular as Americans live longer lives.  Insurance News Net’s Linda Koco discussed this trend in the article “Annuities/LTC Combos More Than Double Sales.”

Milliman and the Society of Actuaries researched annuities with long term care benefit riders from five different companies.  In 2011, there were five total plans from these insurers that sold $25 million in premiums.  By the next year those five plans sold $44 million in premiums.  But in 2013, when the number of plans increased to six, premium sales totaled $320 million.  While other annuity products sell billions of dollars of premiums yearly, this sales increase is still significant because annuities with LTC riders are still fairly new.  Those who develop these products expected a steep increase in sales once more people became aware of this type of benefit.

Annuity and long term care combination products go by a few different names.  They have increased in availability since legislation in 2010 and 2013 made them more desirable to use.  That legislation combined with an aging population of Baby Boomers is increasing the need for annuity/LTC combo products.  Milliman researched the living benefit features of annuities and life insurance plans.  The annuity data came from six different products at five insurance companies.  While the products are not all the same, they offered some common benefits.  Sales of these plans are typically from ages 50 and older.  The LTC rider is optional with two plans, but three plans include an automatic ABR or EBR.  One plan is a with a variable annuity, one is with an MVA fixed annuity, two are with book value fixed annuities and a fifth offers two choices for the annuity.  The plans included coverage for in home care, assisted living, nursing homes, hospice care and adult day care.  The maximum lifetime benefit varies by plan as does the way that the benefits are paid out.  Four plans have a single premium payment, while one allows for flexible premiums.  Only two of the plans offer a single and joint life annuity, while the others are only for single purchasers.  The target market for each annuity product varies.

Living benefits related to a health event have almost $4 billion in premium, when you account for annuity and life insurance policies.  This includes $1.2 billion for death benefits that were accelerated because of a chronic illness, $2.4 billion for life insurance with LTC riders and $320 million for annuities with LTC riders.  These living benefit totals don’t include annuities with GLWBs, GMIBs or any living benefit riders that aren’t triggered by a major health event.  The regulations that cover this type of living benefit include the NAIC Long Term Care Insurance Model Act and Model Regulation.  Speak with an Annuity FYI expert if you have any questions about annuity products with long term care riders.

Written by Rachel Summit

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