sigma 4/2025 - Life (span) insurance

Long-term care moves into life insurance

Reflecting these changes, the US Bureau of Labor Statistics (BLS) has removed the LTC health insurance component of its Consumer Price Index (CPI) for inflation calculations from October 2025.

This change is more than just a methodology update: it affirms the evolution of LTC insurance from a discrete health insurance line into a central feature of life insurance and retirement solutions. The insurance industry’s ability to package LTC risk within wealth-protection products in this way may offer a key support to society’s capacity to fund the growing later-life care needs of ageing populations.

Long-term care insurance protects against the cost of extended care services needed when an individual is unable to perform basic daily activities due to chronic illness or disability. In its October announcement, the BLS noted that “LTC coverage for new enrollees is now typically provided as a hybrid plan that is an add-on to a different type of insurance [and] stand-alone LTC plans are largely not enrolling new customers… BLS is removing LTC from the index entirely.” Its decision is a recognition of the US LTC market’s transformation from traditional standalone policies to hybrid or “linked-benefit” designs.

Shifts in the LTC product landscape

Insurers have learned that adding LTC coverage to core life products significantly enhances their value proposition for consumers. In 2024, roughly USD 3 billion of hybrid life insurance sales (life with LTC or chronic illness benefits) represented 5% of newly issued policies but 19% of annualized life insurance premiums. A smaller segment – annuity/LTC combinations – generated USD 629 million in new sales last year, the start of an asset-based approach to funding LTC.

The hybrid format can offer benefits to both insureds and insurers. Consumers gain liquidity, guaranteed premiums, and multi-use protection. The fact that policyholders are assured of a payout –either through care needs or a death benefit – helps deal with the fact that consumers typically fear losses more than they enjoy gains. Insurers reduce morbidity volatility, diversify revenue streams, and increase capital efficiency by embedding LTC within an existing life or annuity chassis.

Distribution also plays a key role in the success of combination products – especially chronic illness riders. Sales networks for whole life cover plans are well established in the US and competition is significant. Because chronic illness riders fall under Section 101(g) of the Internal Revenue Code rather than as LTC benefits under Section 7702B, they can be sold by life-licensed agents without additional LTC certification requirements, significantly expanding distribution capacity. A larger number of carriers thus offer chronic illness-acceleration riders at no upfront cost, contributing to this product’s greater market share.

LTC outlook: demographics and opportunity

Demographic changes will likely support the growth of LTC business. In the US, the population aged 80 and above will more than double by 2050, driving steady growth in demand for care services and associated financing needs. At the same time, public programmes such as Medicaid face fiscal pressure, increasing the need for private-sector participation in LTC risk financing. Funding this growing societal LTC need in the future will rely on insurers being able to repackage and reprioritize care risk within broader wealth-protection products. For insurers, this presents an opportunity to design capital-efficient products that manage morbidity risk while leveraging hybrid life and annuity platforms to meet rising demand. LTC insurance is not at an end – it is evolving into a central feature of holistic life and retirement solutions.