Asset Based Long Term Care Insurance

Maryalene LaPonsie | September 26, 2011

Sales of asset based long term care policies are on the rise, according to a new report from the American Association for Long-Term Care Insurance (AALTCI). The number of lives covered by these plans grew 83 percent in 2010. In addition, more than half of all new asset based policies were sold to seniors older than 65 years of age.

What is asset based long term care insurance?

Asset based long term care insurance is a type of policy that combines life insurance or an annuity with long term care coverage. While older individuals are often encouraged to purchase long term care protection in addition to their health insurance coverage, some balk at the premiums, especially when there is no guarantee they will ever need long term care.

However, asset based plans offer life insurance--or in some cases, annuities--that ensure policyholders receive some benefit from their premiums regardless of whether they need long term care. According to the AALTCI, the most common asset based long term care insurance plans are Life+LTC policies.

The combination of life insurance and long term care coverage can be purchased in one of two ways:

1. Recurring premium or single premium policies As with other life insurance policies, these Life+LTC plans have a specific death benefit. However, individuals may use some or all of the death benefit in advance to pay for qualifying long term care expenses, if needed.

2. Optional rider Another way to combine long term care insurance with life coverage is with an optional rider. Riders are generally attached to permanent life insurance policies and may offer long term care benefits that are a multiple of the death benefit. Any death benefit not used for long term care goes to beneficiaries.

Trends in Life+LTC policies

The AALTCI report considered data from the industry's leading insurers to determine the 2010 trends in long term care insurance. While more than a half of Life+LTC policies were sold to seniors, only a third went to individuals between the ages of 55 and 64. Two-thirds of single-premium plans had face amounts of $100,000 or greater.

"Asset based or linked products are experiencing growth as they are highly suitable for a very specific consumer," Jesse Slome, AALTCI's executive director, said in a statement. "One of the features of linked products that consumers find attractive is the principle that premiums are not 'lost' if the individual never has a qualifying long-term care need."

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