While traditional stand-alone long-term care insurance (LTC) products have seen a drop in popularity in the past several years, life insurance-backed long-term care funding strategies have experienced tremendous growth.
In 2017, life-LTC hybrid policies increased by about 5 percent to 260,000 new policies sold. Furthermore, new premiums paid for these hybrid policies increased by over 18 percent, and about 25 percent of all new U.S. life insurance premiums paid went to policies that offer benefits for long-term care or chronic illness. While there have been a few new products developed in the stand-alone long-term care insurance market, most of the recent developments have been in the hybrid-based life insurance market.
Despite the growth of the life-LTC hybrid policy marketplace, many people still do not have a definitive understanding of the differences in options now available for long-term care funding. Generally speaking, life insurance-based long-term care funding products fall into two main categories: 1) linked-benefit products and 2) accelerated death-benefit riders. Linked benefits are closer to true long-term care and can be marketed as such, while accelerated death-benefit or chronic illness riders cannot be marketed as long-term care insurance, even though the benefits can be used as such.