By Mike Roscoe
Most people want to pass on some of their assets to children and grandchildren, but, at the same time they might be asking themselves, “Wait – what if I need that money to care for myself?” Suddenly, the desire to ease the burden of the younger generation’s college expenses or home purchase decisions might seem like less of a priority.
We’re seeing a great transition in American society. The baby boomer generation, born between 1946 and 1964, began turning 65 in 2011. This means that a large group of Americans is going to need long-term care (LTC) as they age into the longer lifespans produced by medical advances and healthier lifestyles.1
Complicating this picture is the fact that families today are more spread out geographically, so family members may not live close enough to each other to provide consistent care. They may also be working full time and not in a position to cut back their job commitments in order to care for a family member. At the same time, the need for LTC will continue unabated, despite the availability of caregivers.
Given the growing need, LTC coverage, and its attendant cost, is increasingly on people’s minds. AXA Equitable Life Insurance Company (AXA Equitable) and other insurance companies knew they had to engage customers where they were on this issue. The market for LTC coverage has been a challenge for consumers: often characterized by steep price increases and, with some long term care policies (standalone LTC coverage), the requirement that the insured be housed in an extended-care facility instead of at home. Still others, who may have had standalone LTC coverage, never used it.
In devising a way to offer LTC-type benefits to customers. AXA Equitable and affiliate MONY Life Insurance Company of America (MLOA) began offering LTC coverage as a “rider” with some of its life insurance policies in 2006. The LTC rider, which may be used in lieu of some or all of the death benefit, can be provided at an additional cost.2 The rider allows the life insurance policy’s death benefit to be accelerated if the insured is chronically ill. If there is a need for life insurance coverage, the rider has some advantages over standalone LTC coverage in that it is generally less expensive and offers the assurance that the insured will not pay for something that he or she doesn’t use. In other words, the insured either uses the coverage for LTC or beneficiaries will receive a death benefit.
The coverage has become very popular, and many of our life insurance applicants apply for the rider. LTC coverage can be one of the “living benefits” of life insurance, one that increasingly resonates with customers who respond more favorably to a discussion emphasizing terms like “protection” than they do to talk emphasizing a “death benefit.” Today’s customers want us to place the emphasis on protection.
Simply put, today’s families need options that were not available to their parents, and the changing demographics of the American family call for products that, in many cases, will align better with their particular circumstances. Addressing the needs arising from LTC is critical not only for customers, but also the insurance industry.
When assessing their insurance needs, it is important for consumers considering the option of purchasing a life insurance policy with a long-term care rider also consider their need for life insurance coverage. They should be aware that since the rider is an acceleration of the life insurance policy’s death benefit, there is only one pool of money for both the long-term care benefit and the death benefit. Also, both riders and standalone long-term care policies may have unique features such as inflation protection riders, joint spousal benefits and/or discounts to compare and contrast..
Mike Roscoe is head of Life Product Development for AXA in the US.
Long-term care riders have restrictions and limitations and may not be available in all jurisdictions or may vary. For more detailed information on costs and coverage consumers should contact their financial professionals.
Life insurance products are issued are issued by AXA Equitable Life Insurance Company (AXA Equitable), NY, NY or affiliate MONY Life Insurance Company of America (AZ stock company, administrative office: Jersey City, NJ). Variable products are co-distributed by AXA Advisors, LLC and AXA Distributors, LLC. AXA Equitable. MLOA, AXA Advisors and AXA Distributor are affiliated companies and do not provide tax or legal advice. Consumes should consult with their own tax and legal advisors regarding their individual circumstances. AXA Equitable and MOA are solely responsible for their own obligations.