Is Long-Term Care Uninsurable?


Options for funding future care are dwindling for the millions of baby boomers who will need pricey long-term services as they age.

Since 2004, the number of long-term care insurance policies dispensed in the United States has decreased by 38 percent, according to a recent industry analysis conducted by Moody's Investors Service.

A product still considered to be in its infancy when compared with other types of indemnity plans, long-term care insurance has been hailed as a boon for middle-aged adults trying to financially prepare for an uncertain future.

Now however, it appears as though the future of the traditional long-term care policy may be just as unsure.

In the past two years alone, a host of industry titans, including: Met Life John Hancock, Prudential, UNUM and CNO Financial Group, have either ceased issuing long-term policies, or have slashed their offerings.

The main reason these major firms are backing out?

In a word: money.

Unlike other traditional insurance products (car, home, etc.), many people who purchase long-term care insurance actually use all of their benefits.

In a press release, Laura Bazer, author of the Moody's report, says the newness and complicated product structure of long-term care policies make coming up with profitable pricing methods tricky for most insurance companies.

Mispricing can deliver a debilitating monetary blow to a provider—one that they may try to mitigate by hiking rates and decreasing benefits for current and future policy holders.

It appears to be a lose-lose situation for all involved as increasing premiums can put plans financially out of reach for many adults.

The future of long-term care insurance remains shaky. In an effort to balance profitability with affordability, some companies are starting to offer different options, including: 'shared care' policies that allow spouses to combine long-term care benefits, and hybrid policies that combine life insurance and long-term care benefits.

To learn more about long-term care insurance, see:

7 Things to Consider Before Purchasing Long-Term Care Insurance

At What Age Should You Buy Long-Term Care Insurance?

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Hybrid policies (term/ltc rider) are kinda the only option out there that looks sustainable for the companies and for the consumer. One big issue is that this is so new to the market, that the average brokers or agents, are not familiar with them. If you do a hybrid, you should look to see if the indemnity benefit placed to the ltc rider on the policy can be put in an irrevocable trust so that whatever's left (lol but could happen) is left tax free & not part of the estate.
My husband and I both have long term care policies through Riversource, which is a division of Ameriprise. They base the starting cost on your age at the time you get your policy. The younger you are, the cheaper the starting cost. We have had the policy for 20 years. At certain points the premium went up (age milestones like 50, 60 etc) but not by very much. Both policies combined cost about $1600..