Long term care coverage is changing.....

There are risks in life that are insurable; for example, premature death (while in good health) or living long enough to require health care services. For premature death, we have life insurance and for health care services, we have long term care insurance.

So, which is right for me?

Life insurance has been around for over 100 years while long term care insurance has only been around since the 1980s. For that reason, the subject of long term care insurance is a changing landscape.

Insurers are still learning about long-term care coverage and as a result, some of them have stopped issuing new long-term care policies and temporarily put a hold on that line of business. But, why?

Several of the reasons for this include;

• Long-term care policyholders tend to not let policy’s lapse (as opposed to life insurance policyholders who will drop policy’s in larger numbers)
•  Americans are living longer than insurer’s predicted
• A low-interest-rate environment is making it difficult for insurers to maintain and grow the reserves that they need to service claims.

Fortunately, these issues have a positive outcome. But, why?

Because of current circumstances, some insurer’s are merely taking a pause and the ones that are still in the market have already figured out how to make LTC viable. Insurer’s that have pulled out of the market will get back in, but will do so better positioned to take advantage of the opportunities; the demand for LTC products is too great for insurers to ignore. The lesson here is if you have a good long-term care policy (“good” is a subject for a future blog) keep it and if you want long-term care insurance now you can still get it.

So, why is long-term care insurance so important?

The risk of long-term healthcare costs devastating your estate is significant. The cost of care at home can run in excess of $20,000 a month ($25/hr. * 24 hours/day * 30 days/month). The cost of skilled care at a facility can easily run over $10,000 a month. Therefore, insurability against this risk has become a core part of our estate planning practice.

What can I do to protect myself and my family from these rising costs?

We will work with your advisors to design a long-term plan that is customized for your estate. Today, the insurance industry provides uniquely suitable products that match your needs. These are often hybrid products that combine life insurance and/or annuities with living benefits that will assist you in covering the high costs of health care. For example, you now can buy products that are designed to provide your family or a chosen charity with a significant death benefit if you do not use all of the benefits available to cover your lifetime long-term care costs. (E.g., $250,000 death benefit and $250,000 long-term care benefit - if your covered cost of care is $5,000 per month for three years ($180,000) then, your heirs will receive a net death benefit of $70,000. This appears to be too good to be true; you are shifting the risk of loss to the insurance company in exchange for the loss of the use of funds during your life.

Long-term care coverage is a critical component of a well-designed estate plan. Outliving your money due to high health care costs is one of the most common fears and frustrations of our clients.