Pricing and Underwriting of New Combination Products—Will We Get It Right?

The Pension Protection Act of 2006 includes some important tax rules affecting combination plans that feature life or annuity plans coupled with long-term care insurance (LTCI). Many of these rules will become effective Jan. 1, 2010. In some cases, the rules will be applicable to policies on the books prior to that time. Among the benefits resulting from these new rules, the most notable would seem to be the clarification of tax treatment of annuity/LTCI combination products. Under certain product designs, distributions of annuity cash values—which in the past would have triggered a taxable event—may be payable on a tax- free basis as LTCI benefits. As a result of these factors and the huge untapped market for products that address long-term care needs, there are a significant number of companies developing combination plans in various forms.

http://www.soa.org/library/newsletters/product-development-news/2008/oct...