Recent news has been bad if you are an owner of long-term care insurance. Some companies have raised premiums significantly in the wake of an increasing number of claims made by policy owners and increasing cost of care.
For many policyholders, especially those on a fixed income, the raise in premiums may be academic and force them to let go of the insurance altogether, but we think there are three things to consider when deciding whether to continue on with your long-term care insurance:
- How Much Care Does the Policy Provide: This is a major area where people have no idea what their policy will even pay for. We had a client recently who only had $150 per day in nursing home coverage and no rider to provide for inflation. That client ended up being sued by the nursing home because there was a shortfall between what the policy would pay out and the nursing home's bill. It is important to review the coverage amounts, the length of coverage, and what type of coverage (i.e. in-home, assisted living, nursing home) the policy will provide.
- How Much Longer Will I Likely Have to Pay: For folks who are in their early retirement years, the prospect of a major increase to premiums now does not bode well for the future. The average age of someone to enter into a nursing home in the U.S. is 79. Depending on your family history and current health situation, the average length of time you may have to continue to pay on a policy could be a major factor into whether you keep the coverage.
- Availability of Other Planning Tools: If you already have a secondary plan in place, including a Medicaid Trust, the cancellation of a long-term care insurance policy may not be the worst thing. By no means do we think that the Trust, in and of itself, is an all-encompassing solution. The Trust will not provide benefits like in-home care coverage and assisted living coverage that a long-term care insurance policy contains. However, for the right client, a Trust and other planning may be sufficient depending on your resources and income needs.
We know as long-term care insurance becomes more expensive and more difficult to get, many policyholders will be faced with the challenge of possibly abandoning their policies. We hope that those owners will examine these three areas before deciding how to proceed.