10 questions carriers don’t want you to ask about life and LTC insurance

We have seen plenty of discussion recently about the growing need for long-term care; rising costs of care, demographic changes and legislation are top of mind for many brokers and employers in 2023. Some people believe the market may be trending more toward hybrid life and long-term care solutions in the years ahead. But we know there’s clearly a need for long-term care, and if the market is trending toward hybrid products, it begs the question:
What’s the right life insurance and long-term care solution for your clients?

The truth is, there are a lot of products on the market, each with relative strengths and weaknesses. Different situations will call for different products.\

So, you need to get smart about these hybrid products. And that means asking carriers lots of questions! As you start to dig in, you’ll quickly realize there are hundreds of different ways to take a conversation about life and care products. To focus your conversations, I think there are several key areas you can target with questions that will allow you to differentiate the products in the market. Let’s explore 10 of these questions now.

Questions about product structure

Product structure can often break down into a question of stability versus flexibility.

Question #1 is: What type of life insurance product is being offered?

We’ve seen these products built on different chassis: whole life, universal life and even term. Each of these structures has benefits and drawbacks, and even within these types of life insurance there can be significant differences from one insurer to another. Knowing the structure can often lead to other questions.

Question #2: How much flexibility is available?

Products such as universal life can be structured many ways, with benefits designed to last to many different ages and with some more or less conservative in design. Universal life typically offers the flexibility to adjust payments or the death benefit, but policyholders must be thoughtful about how this impacts their policy.

On the other hand, some permanent life products may be fully guaranteed and can offer more stability, but you may sacrifice having the flexibility of universal life and may pay more in premiums. There’s a trade-off either way, and you’ll want to understand the products and your clients’ needs for flexibility versus stability.

Question #3: Can the product change?

Are premiums fixed or flexible? Could costs increase based on claims experience? Do the same terms apply to both the life and long-term care portions of the contract (e.g., is one guaranteed while the other is not)? This will help you in understanding where there is risk in the contract. Insurers have much more experience with life insurance than benefits for long-term care, so it’s important to understand what parts of the contract — if any — the insurer has flexibility to change.

Questions about death benefits

The appeal of these hybrid life and long-term care products can often come from the fact that they are not “use it or lose it” propositions. Even if the insured never requires care, their beneficiary will receive a death benefit. Although the death benefit payment may seem straightforward, you might want to consider the questions below.

Question #4: Is death benefit restoration available, and how does it work?

You may be able to restore the death benefit that’s advanced to pay for care. But it’s important to know exactly how the death benefit gets restored. Is it fully restored to the original amount? Is it restored immediately?

Question #5: Is it possible to reduce the death benefit in later years as needs change?

Some products allow for changes in the death benefit (either scheduled or at the policyholder’s discretion as discussed previously). With some products, this will impact the long-term care benefits, but with others it will not. It’s important to understand the difference in how the reductions operate and how they may affect the care benefits (particularly at a time when they may be needed most).

Question #6: What happens if a policyholder doesn’t want to pay for coverage anymore?

Some policies may include cash value that can fund the policy for a period after payments stop (or be taken as cash if the coverage is no longer needed). With other policies, you may be able to maintain a level of coverage even after you stop paying premiums. Be sure to ask what that looks like and what options are available.

Questions about long-term care benefits

The rise in the need for long-term care means that, for many, care benefits take on even greater importance. For them, the care benefits are the most important part of the hybrid policy, so make sure to ask the questions below.

Question #7: What kind of long-term care benefits are available?

Different clients will have different care needs. Are benefits available for professional care only? Or can your client receive benefits for family caregiving as well? Look carefully at the costs of care and who may be most likely to be the care provider.

Question #8: Is permanency a requirement?

Benefits covering care can take various forms — each with different pros and cons. One of the more common areas of confusion is the question of permanency when it comes specifically to chronic care benefits. These products may require that the policyholder’s need for care be permanent before they’ll pay benefits. This may not always be the best fit, particularly if you’re dealing with a younger demographic. It’s possible they may go on long-term care due to sickness or injury from which they expect to recover.

Question #9: Can you extend care benefits?

Features may be available to extend the amount of care benefits available to policyholders. With many policyholders buying coverage for the long-term care benefit, what options are available to maximize care protection?

Question #10: Will the policyholder be able to collect long-term care benefits up to the full face amount of the policy?

As addressed in Question #5, some hybrid products have a death benefit that reduces at some point during the life of the policy. Depending on the product design, the care benefit may or may not reduce when the death benefit reduces. Other products may pay a discounted care benefit, meaning that the death benefit will be reduced by a greater amount than the care benefit collected. It’s important to know how the product will function so there are no surprises when your client collects care benefits.

With a growing need for care and a growing focus on hybrid life and care solutions, the care conversation is more important than ever. These questions can help you begin to determine the right products for your clients, but they are by no means exhaustive. Your best bet may be talking to a sales representative who you trust, get to know them and their products, think carefully about your clients’ needs and don’t be afraid to make your rep squirm a little bit with these tough questions.

Adam Bezman is the executive director for product and innovation at Trustmark. He may be contacted at [email protected].