Long-Term Care Insurance Saves the Day!

In “Expense and Emotions in Preparing for Long-Term Care” (New York Times, March 26, 2013) Ann Carrns describes a situation that many Americans know all too well.  A 61-year old man saw his parents decline rapidly after reaching their 80s.  His father required a live-in health care aide for his last two years, and his mother developed dementia and died in a year.

Fortunately for all concerned, the father had purchased a long-term care insurance(LTCi) policy about 30 years before his death, so he was able to stay at home and cover the bulk of his LTC expenses with the policy.  Sadly, only 10% of Americans own long-term care insurance (LTCi) – even today! – and find themselves in emotional and financial crises when a loved one needs care.  The son of this couple is the exception, however, because he has applied for an LTCi policy for himself and his wife and is currently awaiting a final decision by the provider.

Although the article begins with this very positive scenario, Ms. Carrns then misrepresents LTCi as “…an increasingly expensive and complex product.”  Yes, the cost of premiums has risen in recent years, primarily because the unusually low interest rates in the US have required providers to increase the reserves they are required to maintain by law to ensure that all claims can be paid.  Unfortunately, Ms. Carrns fails to mention this requirement or the fact that these increases, while difficult for some buyers to absorb, will guarantee that they will receive the funds to defray the cost of care when they need it.

As far as “complexity” goes, individual policies have become more standardized and streamlined throughout the industry.  Yes, the number and range of options offered by policies have increased, but this reflects the maturity of the product and helps customers and agents find the policy that most closely meets client needs.

The article goes on to cite specific examples of costs, around $200 to $300 per month, which the reporter calls a “hefty bill” for retirees.  But when you consider the $80 – $100 that many Americans pay monthly for cable TV, the LTCi premiums stack up as a pretty good inventment, considering the $200,000 to $300,000 in benefits, which the Ms. Carrns notes that policy holders will receive when they require care.  Furthermore, a seasoned LTCi specialist can help clients select features that will reduce premiums while still providing a significant financial benefit when care is needed.