Long-term care policies are under attack. Or, at least that’s the way I see it. In Vermont we just had one major carrier get out of the business and another has asked for a policy increase of 40%.
What has happened is insurance companies made several mistakes when they started writing this insurance. They made assumptions that were not what they expected and are losing money on this insurance. As a result they are either getting out of the business or asking for huge increases in premiums.
This means I’m more than a little scared to sell a traditional long-term care policy right now. I don’t have a big interest in placing an insurance policy and then have the company turn around and ask for large premium increases five, ten or even twenty years after the policy has been in force.
Instead we’ve found life insurance products that not only will pay for long term-care coverage and have guarantees that prices won’t be increasing along the way. These policies have many of the same features as traditional long-term policies with one big change……if you don’t use it for long-term care, there is a death benefit for your heirs. The reason for this is that these policies are life insurance policies that give the policyholder the right to use the insurance for long-term care if needed and if not needed, there is the traditional life insurance death benefit.
These policies are designed for those who are thinking about or have put away a sum of money for self-insurance should they need help with activities of daily living at some point in the future. Although these policies are life insurance, they are being marketed to those who want to have long-term care insurance but don’t want to pay premiums if they don’t ever need the insurance. I think they make sense for two reasons:
One – they have guarantees that when you put your money into the policy you will either get a benefit that helps pay for long-term care or your heirs will get a death benefit.
Two – These policies tend to have modest increases in value and if you need your money back, you can get it back.
I’m wondering if you’ve thought about long-term care insurance, and if you haven’t considered it what are your thoughts?. If you would like to discuss this topic further, please contact me at Jpatrick@stage2planning.com.