2018 Trends in Long Term Care

Trends in Long Term Care

The last couple of years have seen significant changes in Long Term Care insurance (LTCi).  These are worth noting for anyone in their 50s and over (or if you know someone in that age range).
To start, let’s be clear on what we are referring to.  “Long-term care involves services designed to meet a person's health or personal care needs. The most common type of long-term care is help with everyday activities, also called ‘activities of daily living.’ These activities include bathing, dressing, grooming, using the toilet, eating, and moving around. People often need long-term care when they have a serious, ongoing health condition or disability. The need for long-term care can arise suddenly, such as after a heart attack or stroke. Most often, however, it develops gradually, as people get older and frailer or as an illness or disability gets worse.”  (From the National Institute on Aging)
Long-term care is not typically covered by most health insurance or Medicare.  This is where LTC Insurance comes into the equation.
OLD TREND: In the past, most LTCi policies offered a benefit (dollars per day or month), if care was needed, in exchange for a set premium that was intended to be fixed and not change.  However, more of the policy holders have needed care than insurance companies expected, and the costs have skyrocketed.  These experiences have significantly increased the costs of new policies.  In addition, many insurance companies have felt the need to use a provision in the contract to increase the premiums for existing policies that were intended to be fixed.  This has put the policy holder in a tough spot of having to pay more, accept less coverage, or cancel the policy after paying for a number of years.  These trends, plus the risk of paying for years but never needing care and therefore getting nothing back in return, have created some changes.
NEW TREND: Insurance companies have responded with new forms of LTCi (called asset-based) which combine life insurance (or an annuity) with long-term care benefits.  In simplest form, the life insurance policy provides a guaranteed death benefit, but allows the policyholder access to that death benefit for long-term care expenses if needed.  These policies offer a fixed premium that cannot be increased, plus the assurance of knowing the policy will pay out either through death benefit or long-term care.  The longer someone waits to purchase a policy like this, the more expensive it will be.  In addition, there is always a risk of becoming uninsurable based on health.
This is just intended to be a broad look at the trend change.  Each person’s situation is unique.  If you have questions or want to talk this over more, please give us a call.  Glad to help!

Brent Williams, CFP®