What Happened to Long-Term Care Insurance?
In the 1990s, more than 100 insurers sold traditional Long-Term Care (LTC) policies and now fewer than 15 insurance companies still do. In the past, LTC insurance required paying an annual premium in return for the reassurance of receiving payments to cover in home care assistance, assisted living or nursing home with daily living activities such as bathing, dressing and preparing meals. But what the insurers did not bargain for was the enormous financial burden of helping an aging population stay in their home for many more years than they estimated. Financially battered by their losses, LTC insurers began to steeply increase their annual premiums of existing policyholders to cover the financial grossly underestimated payouts. In the mid-2000s, insurers obtained approval from state regulators to raise rates — some rates increased more than 100%. According to the June 9, 2018, Wall Street Journal print edition, “Long-Term-Care Insurance Isn’t Dead. It’s Now an Estate-Planning Tool, ” Massachusetts Mutual Life Insurance Co. began applying for average increases of about 77% in May 2018, affecting almost 54,000 of its 72,000 LTC policyholders. MassMutual had not previously asked long time policyholders to pay higher premiums.
Should I Still Purchase a Long-Term Care Insurance Policy?
There is no way to avoid growing older nor the need for assistance with long-term care. That assistance included daily living activities such as bathing, dressing and preparing meals, whether provided by a spouse, family member or a home health care aide. According to federal government projections, more than half of today’s 65-year-olds will require long-term care at some point. 25% of Americans turning 65 between 2015 and 2019 will need up to 2 years of long-term care. 12% will need 2-5 years, and 14% will need more than 5 years of care. A round-the-clock aide in a private home, assisted living facility, or nursing home may cost you and your family up to $140,000 annually, which isn't covered by Medicare. LTC policies can provide financial security for you and your family, including out of pocket expenses for hiring a home health aide or companion. It is not uncommon to also see affluent families in Westchester, Nassau, and Fairfield Counties with seven-figure investment portfolios financially devastated by years of round the clock care for aging and ill parents and/or spouses.
How Much Do Long-Term Care Policies Cost?
Premiums for Long-Term Care policies average $2,700 a year, according to LifePlans, an industry research and analytics clearing house. Couples may get a discount: typically 30% off the price of policies bought separately. If you have few assets, you may eventually be able to cover LTC costs via Medicaid. If all you want is cost-effective coverage traditional LTC insurance is your best best. However, its important to keep in mind that LTC policies are "use it or lose it". If you don't use a traditional LTC policy, you won't get the money you spent on it back.
What is a Hybrid Long-Term Care Insurance Policy?
Hybrid policies are new tools available on the market, and are becoming very popular. These policies combine long-term care coverage with a life-insurance benefit. According to industry-funded research firm Limra, 260,000 people purchased hybrid insurance policies last year...outpacing the 66,000 traditional long-term-care policies sold in 2017.
According to Gary Gulemi, Manager of Sound Insurance Solutions in Fairfield, “Unlike the older LTC insurance plans, the 'hybrid' policies can provide a modest amount of life insurance for your spouse or heirs if you don’t end up using the benefits for long-term care services. Another plus is there are no premium rate hikes because you lock in your premium upfront.”
Gary’s LTC Hybrid Policy Tips
- If the need arises for money to pay for long-term care, you can access the policy benefits for those expenses.
- If you don’t end up needing long-term care, your beneficiaries will receive the death benefit.
- If you change your mind and want your money back, the policies have return of premium features.
- Unlike traditional long-term care insurance, there’s no “use it or lose it” concerns.
According to a recent article on Long-Term-Care insurance by AARP, “As for where to shop, seek out an independent agent who sells policies from multiple companies rather than a single insurer. For extra expertise and a wider choice of policies, look for agents able to sell what are known as long-term care partnership policies — part of a national program that has continuing education requirements for insurance professionals.”
Gary also recommends researching LTC policies in your 50s or early 60s, before the premiums rise sharply with age or poor health may rule out the best coverage options. Every year you delay buying Long-Term-Care insurance, your premiums will be going up.
Headquartered in White Plains, NY with offices in Stamford, CT, Garden City, NY and New York, NY, STEPS Home Care is a family, female, and locally owned company serving New York and Connecticut. Like our clients, we've experienced the stress and challenges of caring for aging loved ones. Our family is here to help yours, sharing experience and guidance to provide you with peace of mind.