Over the last few years, many Americans have finally started to return to the life insurance sector after leaving following the wake of the recession. Many of those now buying life coverage are younger adults who are beginning their families. As this generation becomes more aware of the products available, it seems that many are also opting for life insurance that includes plans for long-term care coverage.
Sales of so-called hybrid life insurance policies have doubled since 2008 - when the recession was still ongoing - and came to about $2.4 billion nationwide in 2015, according to a report from the New York Times. Stand-alone long-term care policies are sold by only a small number of insurers, in which the sales for these plans are only about $300 million. The number of companies offering stand-alone coverage has fallen about 84 percent in the last decade. As more people buy hybrid life insurance to cover those needs, that trend is expected to continue.
Explaining how it works
When it comes to the particulars of various life insurance policies, consumers typically do not have a firm grasp on the benefits they entail, the report said. For this reason, it's important for life insurers selling hybrid policies to highlight why these plans can be so beneficial. Specifically, highlighting that the cash paid into the plan, can be taken out in the future to help cover the costs of long-term care (such as living in a nursing home). Making these distinctions should go a long way to helping people see why these policies are a good idea.
However, it's also important to explain that these plans usually have "surrender periods" during which time the cash in the policy cannot be tapped, at least, not without incurring a financial penalty. Further, it's vital to note that these policies often require a bit of cash up front, which can make them difficult to afford for some consumers. In general, experts say people with assets totaling some $500,000 or more should at least consider such a move.
"Not all of my clients can write a $100,000 check," Kristi Sullivan, a certified financial planner in Denver, told the newspaper. "It's not for everybody."
Finding the right people
Indeed, experts say that consumers who think they will need income in retirement beyond their pensions, 401(k) plans and Social Security payouts might want to consider the benefits of sticking with annuities instead of hybrid life insurance, the report said. In other cases, death benefits might be more appropriate for those who want to leave large sums of money to their families as a means of income replacement.
In any event, life insurers would do well to make sure that people generally understand the options available to them, and help them find the coverage that best suits their long-term financial needs. That, in turn, should lead to the consumer being more satisfied with their coverage overall.