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By: Roger Aucoin, Senior Research Analyst, LIMRA Annuity Research

When it comes to long-term care, most people know the need is real, but LIMRA research suggests few are prepared. Here is a stat that might surprise you: 70% of Americans over 65 will need some form of long-term care. Yet, LIMRA estimates just 3% of Americans over age 50 have any form of long-term care insurance (LTCI) — traditional or hybrid — including annuity with LTCI riders, leaving many people on the financial hook to cover these expenses, with costs, on average, exceeding $5,000 per month.

Research shows there is growing awareness about the financial risks associated with long-term care needs. A recent study by the Alliance for Lifetime Income by LIMRA shows two thirds of consumers* say they are worried about becoming physically dependent on others and more than half worry about experiencing cognitive decline in retirement. Despite rising demand to mitigate for long-term care costs, annuity-based LTCI solutions remain a surprisingly small slice of the market — representing roughly one-seventh of one percent.

Recently, adoption has grown — annuity/LTC combination product sales hit a record in 2024, up more than 50% year-over-year. Yet, annuity/LTC combination product sales represented just 0.2% of total annuity sales in 2024 and 14% of the total individual long-term care insurance 2024 sales (including stand-alone LTCI and combination life insurance/LTCI sales).

Could Annuity LTC Play a Bigger Role in the Conversation?

While retirees may lean on annuities for income, what happens if a long-term care event hits? Suddenly, that carefully planned income strategy can unravel fast. That’s where “true” annuity/LTC products shine.

Unlike basic annuity features that just boost income if you need care, these products take advantage of the Pension Protection Act of 2006, which allows you to use annuity dollars tax-free for qualified LTC expenses. Some products even multiply your contract value for care needs, giving you way more leverage than a simple income bump.

Obstacles to Adoption

First, today’s consumer may already find annuities complex — and adding long-term care insurance features can make them even harder to understand. While LIMRA data shows growing interest in LTCI protection, especially among younger consumers and caregivers, limited awareness of how annuity-based solutions offer tax-advantaged, asset-leveraging options may deter investors from seeking an annuity/LTC solution.

We know that to overcome this lack of consumer knowledge there needs to be a concerted effort to expand industry expertise of this solution. Even the best-designed product can fall flat without knowledgeable professionals explaining its value. Designing and pricing annuity/LTC products requires deep expertise in both investment and long-term care risk management. That expertise must also extend beyond the manufacturer and over to the wholesaling and advisor levels, the front lines.

Beyond education, there is a clear need to expand market capacity, as the inventory is low. Only a handful of carriers currently offer these products, despite having success. Why aren’t more carriers entering the market? This could be due to the specialized expertise required—not only in product design and pricing, but also in understanding and managing unique risks, such as cases where a client may not qualify for traditional life insurance underwriting.

Finally, there are regulatory and distribution challenges to broaden adoption of these products. Annuity/LTCI products face a unique set of regulatory hurdles that differ significantly from traditional annuities. State-level approvals can vary, with individual jurisdictions imposing their own requirements around product structure, disclosures, licensing and long-term care benefit qualifications. Additionally, firm-level compliance may require extra layers of review, especially when LTCI benefits are involved —slowing down product rollout and limiting availability.

The Opportunity Nobody’s Talking About

There is about $754 billion sitting in fixed-rate deferred annuities as of the end of the first quarter of 2025, and more than half is non-qualified. As interest rates dip, those assets turn into “lazy money.” Imagine redirecting just 20% of the $30 billion coming out of surrender this year into annuity/LTC products. That is $6 billion in sales — compared to the $449 million annual average over the past decade. Given the growing demand for long-term care and fewer traditional options, could Annuity/LTC solutions help fill the gap?

*Ages 45-85 with at least $150,000 in investible household assets.