Every five years or so since 1990, LifePlans has published a report titled, “Who Buys LTC Insurance?”
It is a very insightful resource that studies both buyers and non-buyers and will take you far in your journey to sell more LTC Insurance.
Download Your Copy of “Who Buys LTC Insurance?”
We have only one disagreement with the LifePlans report.
We would change the title to “What has been SOLD to buyers of LTC Insurance?”
We know insurance agents and financial planners have been highly influential in shaping the benefits that were ultimately purchased by their clients, as well as designing many plans that were ultimately not purchased by their prospects.
Let’s dissect the LifePlans data and look at how LTC Insurance plans have been designed since 1990 in six key areas:
- Coverage Type
- Daily Benefits
- Benefit Duration
- Elimination Periods
- Inflation Options
- Annual Premiums
Coverage Type
As the chart below depicts, Nursing Home Only coverage has declined from 63% to less than 1% of all policies sold.
Home Care only policies peaked at 9% of all plans sold in 2000, but have now declined to only 4%.
Comprehensive policies covering both Nursing Home and Home Care now dominate 96% of all policies sold.
Source: Who Buys LTC Insurance? LifePlans, 2016
Daily Benefit
Over a 25 year period from 1990 to 2015, the average Nursing Home Daily Benefit sold increased over 123% from $72 per day to $161 per day.
As more and more policies moved from Nursing Home Only to Comprehensive Plans that covered Nursing Home and Home Care, the Average Daily Home Care Benefit started at 50% of the Nursing Home benefit, but ultimately didn’t lag far behind, with the average Home Care Daily Benefit sold increasing over 330% from $36 per day to $155 per day.
Source: Who Buys LTC Insurance? LifePlans, 2016
If this trend continues for the next 25 years, you’ll be selling an average Nursing Home Daily Benefit of $359 per day and average Home Care Daily Benefit of $667 per day. (Hey! That’s just the math … we “know” home care benefits will never exceed nursing benefits … or will they?)
At least you’ll be attempting to, if you can find anyone who can afford the associated premium!
Coverage Duration
How long would the policies being sold provide benefits?
While the average duration was initially influenced by lifetime benefits, it has declined only slightly as insurance carriers stopped offering that option.
Source: Who Buys LTC Insurance? LifePlans, 2016
Elimination Period
The elimination period selected by LTC Insurance buyers has shifted dramatically.
Purchasers of the zero-day elimination period have declined from 25% to near zero, while purchasers of 90-day or 100-day or more elimination periods have climbed from 22% to 93%.
Source: Who Buys LTC Insurance? LifePlans, 2016
Inflation Option
How have buyers of LTC Insurance prepared for rising costs of long-term services and supports?
Twice as many purchased inflation protection from 1995 (33%) to 2015 (66%), with the percentage buying compound inflation more than tripling from 15% to 47%.
Source: Who Buys LTC Insurance? LifePlans, 2016
Annual Premiums
Clearly there are many factors that influence the annual premium, including all of the benefit choices discussed above, the age of the buyers and the unique and evolving rate structures of each carrier offering LTC Insurance.
On average, however, we have seen the average annual premium increase more than two and one-half times in the past 25 years from $1,071 to $2,727.
Source: Who Buys LTC Insurance? LifePlans, 2016
Are your prospects ready for average annual premiums of nearly $7,000 in 2040?
Let’s Review!
What has changed based on LTC Insurance purchases from 1990 through 2015?
- Comprehensive Policies covering Nursing Home and Home Care account for 96% of all policies sold.
- Nursing Home Daily Benefits increased from $72 to $161
- Home Care Daily Benefits increased from $36 to $155
- Benefit Duration declined from 66 months years to 48 months
- Compound inflation options purchases increased from 15% to 47%, while purchases of no inflation policies have declined from 60% to 34%
- Purchases of zero day elimination periods declined from 25% to 1% and purchases of 90 day + elimination periods increased from 22% to 93%
- Average annual premiums more than doubled from $1,071 to $2,727
Follow Our Blog in the coming weeks to read
Part 2 of 5: Who Needs LTC Insurance and Suitability!
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