Long term care insurance is a complicated, but important topic that most individuals should consider, with the assistance of a number of professional advisors.
We think the purchasing decision regarding LT care insurance falls into 3 categories:
- those who need it, but cannot afford it,
- those who need it, and can afford it,
- those fortunate enough, after a proper analysis, feel they do not need this coverage.
A major development in the LT care insurance field was announced by MetLife, a major seller of LT care insurance, that they would stop offering this insurance to individuals, effective December 30, 2010. This was covered in an excellent NY Times article (see cite below). This continues a trend of dramatically increasing LT care insurance premiums, in the range of 18-44%, as well as other insurance companies not entering or stopping to sell long term care insurance.
While we feel that LT care insurance is appropriate for the group above, in the middle (people that need the insurance and may be able to afford it), the purchasing decision becomes much more difficult now. As the NY Times article clearly states, the insurance companies have underpriced this insurance in the past, due to numerous factors. Thus, if you purchase this type of insurance and pay the premiums for many years, you could then be faced with the prospect of huge insurance premium increases down the road, or having to drop the coverage because of the high cost of the increased premiums. Neither of these are good alternatives.
We would advise individuals to review whether LT care insurance is appropriate for them. It is extremely important to work together with your financial advisor, as well as an insurance professional that is well versed in LT care insurance, in analyzing this decision. Please note that LT care insurance is highly specialized, so we recommend only working with an insurance professional who is very experienced in this specific area.
As many individuals will face the possibility of huge long term care costs, potentially in the hundred of thousands of dollars, due to longer life expectancies, this is another reason for the importance of good financial planning, which addresses these type of issues.
“When a Safety Net is Yanked Away,” NY Times, November 13, 2010, by Ron Lieber