A new annuity product offered by The Phoenix Cos. was designed as a substitute for long-term-care insurance to pay for a policyholder's years in a nursing home, assisted living facility or at-home care.
This is the latest of several products offered by life insurers as alternatives to traditional long-term-care insurance, which has leaped up in price in recent years to catch up with the cost of nursing care. Alternative products, such as annuities and life insurance policies with special endorsements, are more stable to life insurers because there's an established maximum payout — unlike long-term-care coverage which can pay for many years of very expensive care.
The Protected Solutions Annuity is available in 35 states, not including Connecticut. It works like this: a person pays a lump sum of money in a single premium. After five years, that person — the annuitant — could get as much as 400 percent of the premium in five annual payments if he or she can't perform two out of six daily life activities, such as bathing, getting dressed, eating or going to the bathroom.
If the person doesn't ever need nursing-home care, or some other assisted-living service, annuity payments are paid to a beneficiary so long as the annuity contract has been in place for five years.
In order to qualify, a person has to answer four questions about his or her health. For example, have you been diagnosed with, or treated for, heart disease, dementia and a list of other health problems in the past five years? Have you been confined to a hospital, nursing home or similar facility in the past two years? If the answer is, "yes," then the person wouldn't qualify for the annuity.
As with all annuities, there's a fee. In this case, the customer pays 1.5 percent annually. For example, the cost would be $1,500 per year on a $100,000 policy. The company said, "Connecticut, and a handful of other states, did not approve the sale of the annuity product, based on its design. Phoenix decided not to resubmit the annuity product for approval in those states."
Life insurers have seen tremendous growth in products that offer long-term care and critical care, according to research published a year ago by Windsor-based LIMRA. Life insurers can offer an option for a policyholder to draw down on the money that would be paid when they die in order to cover the cost of a severe hospitalization, nursing care, assisted living or home health care. For these so-called "combination" products, premium sales grew 62 percent in 2010 over 2009.
The median price for a private nursing-home room was $140,525 last year in Connecticut compared with a median rate nationally of $77,745, according to a survey released in 2011 by Richmond, Va.,-based insurer Genworth Financial.
"As the Baby Boomer generation ages and transitions into retirement, there is a growing need for protection against the costs of chronic care and confinement," said Dana Pedersen, vice president and product officer for Phoenix.
The Phoenix annuity is issued through PHL Variable Insurance Company and is available through The AltiSure Group, at http://www.altisure.com.
"We are actually a product design and distribution company, in that what we do is identify needs in the marketplace or products that we think should be designed and created and then we bring them to insurance companies, in this case Phoenix," said Niju Vaswani, president of The AltiSure Group.
The "Guaranteed Enhanced Death Benefit" — five annual payments after the annuitant dies — pays between 125 percent and 200 percent of the original premium paid to a beneficiary. The amount paid depends on the age of the annuitant when the annuity was purchased and the years between the purchase and the annuitant's death.
The "Guaranteed Chronic Care Benefit" could pay up to 400 percent of the initial premium over five years.