Do You Need Long Term Care Insurance?

Long Term Care Insurance or LTCI helps you pay for costs associated with nursing home expenses or home health care if you are sick or injured.

Over the years LTCI has gone from being relatively unknown and little used to becoming almost too popular. Insurance companies may have underestimated their financial exposure in this product, particularly those carriers who offered a lifetime payout benefit. American’s are living longer and the lifetime payout policies are putting a dent in some carriers finances.

Most, if not all, LTCI carriers now offer a limited benefit – say 2 years or 5 years. So at least they can know their exposure is capped.

Also, many players in the Arizona Long Term Care Insurance market have abandoned the product altogether. It has been reported that one large carrier to allegedly abandon this product in some markets is State Farm Insurance. We do not know for sure if this is the case but others are reporting it to be true.

The American Association for Long Term Care Insurance purportedly reported that the carrier had ceased selling the product in some states, including ARIZONA, California, Connecticut, Hawaii, Indiana, Nevada and New York.

What are the odds?

Statistics indicate that 70% of Americans will need some sort of long term care assistance for an average length of 3 – 5 years at a cost of $250,000 – $1,000,000. As with most insurance you never want benefits to ever kick in but in this arena the financial cost to you could be devastating.

The economy is playing havoc with insurance carriers and even that is affecting the LTCI business. Insurance carriers rely upon investment income. However, this low interest environment is hindering insurance companies from earning much needed investment income.

Other carriers are seeing strong interest in LTCI from 30% to 50% gains in applications being submitted.

Believe it or not, but insurance companies expect a certain number of clients to drop the insurance. So when 100% of new policy holders pay their premiums the carrier knows a certain number will quit paying at some point. Those become pure profits since the carrier did not pay any benefit.

However, what they have discovered with LTCI is that very few ever lapse their policies. As we age we realize the importance and need to have our health care intact.

Do you need LTCI?

If you have the income and assets to warrant protecting then you may want to consider investigating getting a quote. Consider if you need nursing home care for a couple of years. Imagine how much money you would need to spend out of your own pocket. Nursing home costs vary from state to state, and perhaps even city to city, but they have risen dramatically over the past 15 years.

Can you afford the premiums, which could be $2000+ per year. This is an estimate of course as the premiums are substantially cheaper for someone in their late 50’s versus a 72 year old.

Getting a quote is free. Matter of fact, contact any number of reputable companies and ask for an agent to come and explain the product and offer a quote. All of this is free. If you desire a recommendation of a great insurance agent who sells LTCI and who I personally know – please call me.

LTCI is heavily dependent on being in good health. So please do not wait until some health incident occurs in your life to being investigating your potential need. As is the case with most insurance (such as life, disability and health) always buy when you are in the best health possible. You will receive the best rate and lowest premium.

Do you need Long Term Care Insurance? Don’t let it simply be a financial decision. Again, if you have assets and investments that you want to maintain over the long term this is a product that you should indeed consider buying. If you need nursing home or home care at some point you will need to spend your own assets first. Once you have depleted your assets then government assistance may kick in. But by that point you are no longer someone with assets.

Long Term Care Insurance Unaffected by Obamacare

One of the mandates behind Obamacare is to treat men and women equally under the health insurance umbrella. However, Long Term Care Insurance is not under the same guidelines so they will continue to charge more for women.

According to Genworth Financial, $2 out of every $3 claim dollars is for women. Women live longer than men and a big reason they require more claim dollars. Insurers will ratchet up rates on women who buy long term care insurance as a result. Women’s premiums are expected to increase 20-40%.

Long Term Care Insurance provides coverage for those unable to care for themselves in a nursing home or need partial care – assisted living. Costs for these services are very high if paying out of pocket. Insurance plans generally coverage a specific dollar amount of coverage for a specific number of years, typically two years or five years.

For example, a LTC policy might provide $200 per day coverage for 2 years.

The rising rates are not expected to impact existing clients or clients who apply together as husband and wife.

Insurers selling group health insurance, beginning 2014, will be able to vary rates based on geography, age, family size and tobacco use but not for gender. So far, Long Term Care plans have avoided this stipulation.

LTC Rates Rising in California

The California Public Employees Retirement System has announced plans to raise long term care insurance rates by 85% in 2015. Not all employees purchase the optional long term care insurance in their benefits package. But those who do will see their premiums nearly double. John Hancock raised rates by 40% and CNA Financial increased rates by 45%.

Long Term Care Insurance helps cover costs associated with nursing home assistance or assisted living. Most everyone knows someone who has been in a nursing home or in an assisted living facility. Costs are rising in both. It makes some wonder if the LTC industry will eventually be an insurance product that is only available to the very wealthy.

At least with life insurance almost everyone can afford a cheap term life insurance policy. That is, until you get into the retirement years when all life insurance is pricey. But long term care will eventually be a product that ceases to exist or becomes known as the rich man’s insurance plan. And you cannot blame the insurance industry. Costs are skyrocketing. They have to do what is needed to remain solvent and hopefully ensure profitability.

The long term care industry has seen staggering increases over recent years as they begin to experience an onslaught of claims. LTC sales took off in the 1980’s. Customers are now in their 70’s and 80’s or beyond and many are needing long term care assistance. Claims are rising. Many carriers sold policies that offered lifetime benefits for as long as the client lives and needs care. Life expectancy has risen and is causing issues with profitablity.

The economy is also causing issues for the insurance industry. Once upon a time, the insurance industry could put money into conservative and fixed investments and earn a sizable return on their hundreds of millions of dollars. Now, as everyone else knows, there are few places to earn a decent, safe return. The lack of investment opportunities is costing the insurance industry profits. And those fewer profits are being passed along to consumers as the need to not lose money on basic insurance products is more important than ever.