The rapidly increasing cost of long-term care is driving dramatic increases in long-term care (LTC) premiums and insurers are becoming increasingly stingy about offering new policies.
When they created the LTC market years ago, insurance companies made two assumptions. They calculated LTC premiums assuming policyowners would let their insurance lapse at a rate similar to owners of other types of insurance, primarily life. This hasn’t been the case. LTC owners are aware of the high cost of long-term care and are holding on to their policies despite national average premium increases of 45 percent last year. Additionally, the insurance companies assumed interest rates would be high enough to create favorable returns on the bond portfolios in which they invest the premiums. The current lengthy period of historically low interest rates can’t end soon enough for these companies.
Unfortunately, these issues are exacerbated by the rapidly rising cost of care. Not only are insurance companies raising premiums, but they are also decreasing the benefit terms of the policies and offering these expensive policies to fewer people. In short, it’s tougher to qualify and when you do, you get less for more.
So, is LTC insurance really worth it?
Despite the current market, it’s still important to have some form of long-term care insurance. According to Longtermcare.gov and the AARP, 70 percent of people 65 and older will require long-term care and the cost of that care will continue to become more expensive.
Genworth’s Cost of Care Survey shows national annual median costs increased across the board for assisted living facilities (6.1%), home care (4.3-4.4%) and skilled nursing facilities (3.2-3.5%). The median monthly cost of an assisted living facility is $4,051, a home health aide costs $4,385 and a private room in a skilled nursing facility $8,517 a month. Genworth estimates these costs will almost double over the next 20 years.
Since traditional policies do not pay out if the policyholder doesn’t require any form of long-term care, consider a hybrid life and LTC policy. By combining permanent life insurance and LTC, these policies provide a death benefit and guarantee a fixed premium over the life of the policy. Please note that the death benefit is reduced when a policy pays for long-term care.
To learn more about LTC insurance that offers the right coverage for the best price with the best terms, contact WisMed Assure Insurance Advisor Tom Strangstalien at 608.442.3730 or [email protected].
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