The Long-Term Care Dilemma: Insurers Leaving, Premiums Increasing
If you’ve planned for long-term care, you’ve done well because there’s a pretty good chance you or your spouse will have a need for care at some point. According to the National Clearinghouse for Long-Term Care (www.longtermcare.gov), about 70% of people over age 65 will need some type of long-term care during their lifetimes and more than 40% will require care in a nursing home. According to the National Clearinghouse, in 2010 it cost an average of $75,000 per year for a semiprivate room in a nursing home, while one year of care at home costs about $19,700 per year.
You may have bought long-term care insurance (LTCI) to help cover the potential costs of long-term care. The Life Insurance and Market Research Association (LIMRA) estimates that over 7 million Americans have LTCI. However, the U.S. Census Bureau estimates that in 2010 there were over 40 million Americans age 65 and older. So only a small percentage of those who face the increasing prospect of long-term care have LTCI.
Companies leaving the business
In spite of the apparent need for LTCI, some of the largest providers of individual LTCI have either stopped selling individual LTCI or they’re planning to do so (although some of these carriers will remain in the group LTCI market).
So if the need for LTCI remains, why are some of the biggest insurers getting out of the individual LTCI market? There are a number of reasons, such as poor investment returns due to the chronic low interest rate environment, the fact that more policyowners are keeping their insurance instead of letting it lapse, the rising cost of long-term care, and the fact that people are living longer, leading to larger LTCI payouts.
If your LTCI carrier is getting out of the LTCI business, don’t worry–you’re still covered. Generally, insurers that leave the LTCI market must either continue to service existing policies or transfer that responsibility to another carrier.
Your LTCI premiums may increase
If you purchased your LTCI policy more than a few years ago, you could be in for a surprise when you get your next premium bill. Several states have allowed insurers to increase their premiums. If your premium does increase significantly, you may be faced with a dilemma: do you keep the insurance and pay the higher premium, or should you stop paying for the insurance altogether and lose not only the insurance coverage, but also all the prior premiums you paid? Here are some alternatives to consider:
|Investment Advisor Representative: Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor. Registered Representative: Securities offered through Cambridge Investment Research Inc., a Broker/Dealer, Member FINRA/SIPC. Cambridge and Affinity Wealth Advisors Inc. are not affiliated.|
Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2012.