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Baby Boomer Trend: Asset-based Long-term Care Insurance

Life insurance policies that provide long-term care benefits are growing in popularity and attracting younger baby boomers anxious to protect their portfolios.

Sales of the policies, when measured by premiums paid, grew 20 percent last year over 2010, and the number of lives covered increased 13.5 percent, according to research by the American Association for Long-Term Care Insurance.

The association's annual study also showed that buyers are purchasing the policies at younger ages. Fifty-three percent of male buyers were under 65, compared to 48 percent of buyers in that age group in the previous year's study. Fifty percent of female buyers last year were under 65, up from 44 percent in 2010. (See: " Is it crazy for life insurers to test for dementia?")

"Generally these are people with assets who can very often self-insure for long-term care, but prefer to transfer the risk to an insurance company," says Jesse Slome, the association's executive director.

The products -- called asset-based, combination or linked policies -- typically require one lump-sum premium payment, usually of $100,000 or more. They provide long-term care benefits for a certain number of years, a death benefit if you don't use long-term care and a money-back option that returns the premium in case you decide you don't want the policy after all.

The features answer three big questions from consumers thinking about long-term care coverage, says Alyce Peterson, vice president of marketing services for Pacific Life, which introduced Pacific PremierCare in March:
  • What if I need long-term care?
  • What if I never need it?
  • What if I get into this policy and it isn't really for me?

What's fueling the asset-based long-term care insurance trend?

Slome says today's low-interest rate environment might be fueling some of the demand. Consumers can't earn much on cash they're reserving for emergencies, so they figure they might as well put it into an insurance policy that can provide long-term care benefits worth several times more than the original investment. Or, at the very least, it can provide money to heirs if they never need long-term care.

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