The Sunny Side of Long-Term Care Insurance

sun drawn on fence with yellow chalk
Mary Sizemore
Mary Sizemore November 7, 2022

With over 25 years of experience, Mary shares her industry knowledge by helping agents and their clients navigate various insurance products. She also stays up to date on current products and trends to support, mentor, and guide her teammates.

Disclaimer: With Medicaid, VA, and insurance regulations frequently changing, past blog posts may not be presently accurate or relevant. Please contact our office for information on current planning strategies, tips, and how-to's.

Finding the Bright Spots in LTCI

The Long-Term Care Insurance (LTCI) market has evolved significantly since its introduction in the 1960s, growing from covering less than three million lives to now covering more than seven and a half million.

While original policies covered only skilled nursing care, LTCI policies today incorporate various long-term care supports and services, including home health care, respite care, hospice care, personal care in the home, assisted living facilities, adult day care centers, and other community facilities. As our population ages, the need for long-term care services will become more important and require even more innovative approaches.

From time to time, we hear negativity surrounding Long-Term Care Insurance. By tackling these concerns, you can address them directly with your clients and alleviate any worries they might have about LTCI.

Long-Term Care Insurance and Rate Increases

Yes, there has been a history of rate increases on LTCI policies written prior to 2014. Longevity and persistency assumptions on early LTCI products proved to be inaccurate. Insurers underestimated how long people would live and how many people would eventually drop their coverage. Another unknown at the time was the extent of the impact that cognitive memory disorders, such as Alzheimer’s disease, would have. In reality, people can live a long time with dependency needs from Alzheimer’s disease and similar memory issues. Unfortunately, these inaccurate assumptions have led to rate increases from most of the major insurance carriers. However, working from historical data – including claims experience and persistency tables – carriers can better project where rates should be and reduce future rate increases. Along with tightened regulations from the NAIC, this hindsight brings more premium stability to the Long-Term Care Insurance consumer of today.

Long-Term Care Insurance is More Expensive Today

Comparing the price of LTCI policies from the early 2000s to today’s plans is like comparing the price of a gallon of milk from 1997 to 2022. Like most things, the price of LTCI has increased through the years. In fact, we have seen over a 70% increase in the price of milk over that period. Due to the corrected assumptions mentioned above, LTCI premiums for new business are higher than what Americans paid in the past, which is creating more stability for premiums in the future. Long-Term Care Insurance is still one of the most cost-effective ways to protect assets from the risk of dependency. Rates can be very affordable and meet many different premium tolerance levels. Our LTCI specialists sell plans averaging $2,500 per year for a single person and $5,000 per year for a couple. When comparing that to the high costs involved with caregiving, LTCI is a bargain!

Read More: Creating a Plan to Age in Place

Fewer Carriers and Options for Long-Term Care Insurance Today

This is true. In the early 2000s, there were over a hundred carriers offering Long-Term Care Insurance, and many of these carriers have since exited the market. Today, there are fewer than ten carriers underwriting LTCI. However, the carriers that remain are committed to the LTCI market and have proven themselves to be stable.  All are rated A or higher with A.M. Best.

Not to mention, we have seen carriers emerge with new funding options for Long-Term Care Insurance. Single-premium, 5-Pay, and 10-Pay are now available in most states. LTCI can also now be bundled with life insurance and annuities. This offers a rate guarantee and provides a death benefit to the estate if long-term care is not needed. There is also an option for a return of premium if the policyholder decides to cancel the policy. A few carriers are including a cash benefit in their policies, which means your client can hire their friend or family member as their caregiver. Needless to say, LTCI policies are much more comprehensive than they used to be.

The Bottom Line

November is Long-Term Care Awareness Month. The goal is to raise awareness for the emotional, physical, and economic toll that long-term care can take on loved ones. It encourages people to have those difficult conversations about long-term care and plan for their own dependency. Both November and December are months that symbolize family gatherings with holidays like Thanksgiving, Hanukkah, and Christmas. Encourage your clients to have those discussions with their families about long-term care. Everyone should have a plan for long-term care and for protecting their assets by transferring the risk to a Long-Term Care Insurance carrier.

If you are already selling LTCI, great! If you are not selling LTCI, whether you’re interested in starting or looking for an expert to refer your clients to, we can help! Schedule a call with our LTCI team today.  You owe it to your clients to discuss LTCI this Long-Term Care Awareness Month!