Annuities With LTC Riders ‘Hot With Seniors’
By David Dankwa
Annuities face an uncertain future but, for the class known as income annuities, demand may be growing. According to recent reports, variable annuities sales have been declining for several quarters while income annuities sales have continued their record growth.
Jim Byrd, founder of Safe Harbor Financial Services, said the income riders on annuities currently are about the best he has ever seen for any product in 30 years working as an insurance agent.
“Even though they have gone down in the last six to eight months, you can still find 7 percent compound interest,” said Byrd. “There is one that pays 4 percent plus market. There are different variations out there. There is even one vehicle that does not cap market return. It can get you a high-guaranteed rate of return, guaranteed lifetime income for you and your spouse.”
The $200-billion a year annuity sector has gone through a number of significant changes since the financial crisis of 2008, with a number of corporations replacing the costly guarantees of annuities they sold with lower-cost versions that guarantee future income if future withdrawals are delayed.
“The downfall of most annuities is that they are not as liquid. Your liquidity is going to be limited to 10 percent a year until the surrender period is up and that can take as long as 10 years,” said Byrd.
Still, for many people in or nearing retirement, annuities may be a good alternative, or complement to, stock and bonds.
“People need a better return on their money and they don't know where to go. They are finding that some of the hybrid annuities right now, not all of them but some, are giving very good returns on their money and there's a safety in knowing that you do not participate in market losses,” Byrd said.
Byrd said new annuity products with unique features have come to market in recent months.
One of the major and popular products is guaranteed lifetime-income annuities. This product provides guaranteed income for both spouses for the rest of their lives. Some insurance carriers have added long-term care riders to annuities, where the benefit is doubled if the insured ends up being confined to a nursing home or needs home-based care.
Byrd said single-premium life policies are also very popular with retirees. This is because of the fact that they offer one single premium in exchange for life insurance, long-term care benefit and the so-called doubler in the event the insured is confined to a nursing home.
Not all long-term care products are created equal. Some of the traditional products send the funds directly to a nursing home or home health care provider.
The new single-premium policies, however, make the payment directly to the insured.
“You can actually have coverage and still get this doubler or it could be paid to anyone as long as you fit the criteria of long-term care, which means you can’t do two of the six daily functions of living. Then the money is paid. It doesn’t have to go to a qualified facility or caretaker.
“It’s very hot with seniors. That’s what they are looking for,” he said.
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