As insurance agents, your primary goal is to help clients secure their financial futures. While many advisors focus on traditional long-term care (LTC) insurance, there’s a lesser known yet powerful alternative worth considering: annuities with long-term care riders.

This strategy isn’t just about retirement income—it’s about protecting your clients from the rising costs of long-term care while ensuring they don’t outlive their savings. In this blog, we’ll explore:

• The growing need for long-term care planning
• Why traditional LTC insurance isn’t always the best fit
• How annuity-LTC hybrids work
• The key benefits for clients
• How to position this solution effectively

By the end, you’ll see how combining annuities with LTC benefits can make you a more versatile advisor while better serving your clients’ needs.

The Growing Need for Long-Term Care Planning

Before digging into solutions, let’s understand the problem.

Long-Term Care Costs Are Rising

The U.S. Department of Health and Human Services estimates that 70% of seniors will require long-term care at some point. Meanwhile, costs continue to climb:

• Nursing home care:$8,000+ per month (private room)
• Assisted living facility:$4,500+ per month
• In-home care:$25+ per hour

Without a plan, many retirees face financial devastation. Even wealthy clients risk depleting their savings if they need extended care.

Traditional LTC Insurance Isn’t Always the Answer

While standalone LTC insurance is a viable option, it doesn’t work for everyone due to:

• High premiumsthat can increase over time
• Strict underwritingthat excludes some clients
• “Use-it-or-lose-it” risk(no payout if care isn’t needed)

Many clients hesitate to pay for something they may never use. That’s where annuities with LTC benefits offer a compelling alternative.

How Annuities with LTC Riders Work

Annuities are primarily designed for retirement income, but certain types can also provide long-term care benefits. Here’s how they function:

1. Immediate or Deferred Annuities with LTC Riders

• Immediate Annuities: Begin payouts right away, possibly with an LTC acceleration feature.
• Deferred Annuities: Grow tax-deferred and allow access to enhanced benefits if LTC is needed.

2. Enhanced Payouts for LTC Needs

When a qualifying long-term care event occurs (inability to perform 2+ Activities of Daily Living or cognitive impairment), the annuity can:

• Double or triple monthly payouts(e.g., a $3,000 monthly annuity becomes $6,000-$9,000 for LTC expenses)
• Provide a lump-sum pay out in some contracts

3. Protection Against Unused Benefits

Unlike traditional LTC insurance, if the care benefit isn’t used, the client (or their beneficiaries) still receives annuity payouts or a death benefit.

Key Benefits for Clients

Why should you present this option? Because it solves multiple client concerns:

1. Guaranteed Income + LTC Protection in One

Instead of buying separate policies, clients get retirement income and a potential LTC safety net.

2. No “Wasted” Premiums

If LTC isn’t needed, the annuity continues providing income or passes to heirs—unlike traditional LTC insurance, which offers no refund.

3. Easier Underwriting

LTC riders are often more accessible than standalone LTC policies, making them a solution for clients with minor health issues.

4. Tax Advantages

• Tax-deferred growth in deferred annuities
• Potential tax-free LTC benefits(under IRC Section 7702B)
• 1035 Exchanges allow tax-free transfers from existing annuities or life insurance into an LTC hybrid

5. Flexible Funding Options

Clients can fund these annuities with:

• A lump sum (e.g., from an IRA rollover, savings, or life insurance surrender)
• Periodic premium payments (in some products)

How to Position This Solution Effectively

Now that you understand the mechanics, let’s discuss how to introduce this strategy to clients.

1. Start with Education, Not Products

Many consumers (and even advisors) don’t know about annuity-LTC hybrids. Begin conversations by asking:

• “How do you plan to cover potential long-term care costs without draining your savings?”
• “Would you prefer a solution that pays you regardless of whether you need care?”

2. Highlight the Dual Benefit

Rather than framing it as an annuity sale, position it as a way to secure retirement income while adding LTC protection as a bonus.

3. Address Common Concerns

• “What if I never need long-term care?”→ “You still keep the annuity’s income or death benefit.”
• “Are annuities too expensive?”→ “The cost is often comparable to standalone LTC insurance, but with added flexibility.”

4. Show Real-Life Scenarios

Use case studies like:

Example: A 65-year-old invests $200,000 in a deferred annuity with an LTC rider. At 80, they need assisted living. The annuity’s monthly payout jumps from $1,200 to $3,600, covering most of the cost—while still retaining value for heirs if unused.

5. Partner with Experts

If your agency doesn’t specialize in annuities, collaborate with annuity providers or wholesalers who can help structure these solutions.

Potential Drawbacks (And How to Overcome Them)

No solution is perfect. Be transparent about trade-offs:

• Lower LTC Coverage Than Standalone Policies
  • Some hybrids have caps on LTC benefits.
  • Solution: Position them as a supplement, not a full replacement, for high-risk clients.
• Surrender Periods & Liquidity Limits
  • Deferred annuities often have surrender charges.
  • Solution: Recommend only for clients who can commit to the holding period.
• Inflation Risk
  • Fixed payouts may lose purchasing power.
  • Solution: Pair with inflation-adjusted riders (if available) or mix with other LTC strategies.

Final Thoughts: A Smart Addition to Your Planning Toolkit

Annuities with LTC riders won’t replace traditional long-term care insurance for everyone—but they fill a critical gap. For clients who:

✔ Want a “no-waste” solution
✔ Prefer simpler underwriting
✔ Like the idea of income + protection in one

…this strategy can be a game-changer.

As an advisor, your role is to offer the best solutions—not just the most familiar ones. By adding annuity-LTC hybrids to your toolbox, you’ll stand out as a forward-thinking professional who prioritizes client needs over product sales.

Next Steps:

• Research top carriers offering LTC annuity riders.
• Train on policy specifics to explain them confidently.
• Start introducing the concept in client meetings.

Your clients will thank you when they have a plan that covers both retirement and potential care needs—without the fear of wasted premiums.