The Past, Present, and Future of Long-Term Care Insurance

We welcome our guest columnist Bruce Bamford.

The Past

Decades ago, facilities were established called skilled nursing homes. They were designed to take care of people who could no longer stay in their homes due to health/aging reasons. Our Medicare program was never designed to pay for these costs. Along came the insurance companies who developed a product called long-term care insurance. These early products were designed to help with costs at skilled nursing homes. As the years went by, more types of long-term care insurance products were developed for Assisted Living and In-Home Care facilities. Then came the costs of dementia/Alzheimer’s care. Long-term care insurance incorporated that type of care to be paid from the policies. Dementia/Alzheimer’s was just a word 20 years ago and now it is an epidemic. The number one cause of impoverishing our seniors today is the cost and care needed for these diseases. No one plans for this cost in planning for retirement, and the average cost is around $250,000/each.

The Present

In the past 10 years, the number of companies selling long-term care insurance has reduced from about 120 to 15. Most major insurance companies have walked away, because they are concerned with the long-term costs of dementia care that will be needed. How do you build an insurance product with an unknown end to this whole situation? Many who own long-term care insurance have also seen price increases over the past eight years. Low interest earnings on insurance company investments, and with dementia being an epidemic, there are more claims paid out today for memory care than ever. This is another reason that insurance companies have chosen to exit the market. 

There are still some very good, quality long-term care insurance companies still selling products, but sales are down extremely from what they were 10 years ago. Today, Long Term Care Insurance is still an extremely important part of asset protection for all consumers and new products are being developed all the time.

The Future

The original design of long-term care insurance is called “Traditional”.  The new products that have been developed in the last decade are called asset-based or

hybrid long-term care insurance. These products are combining life insurance or traditional annuities as the cash value part of the policy. The purpose of these new products is so consumers can get their money back if they do not use the coverage. However, as these new products are being developed the insurance companies have a lot of sales buzz words that go with it to encourage consumers to purchase it and people need to know how to dissect these policies to see whether it’s really a good thing or not. Because these products are insuring you for both life insurance and long-term care insurance, the premiums can be a lot higher than the traditional type, which we call renting (traditional) vs owning (hybrids).

Conclusion

If a sales rep criticizes another company just to sell you their product, walk away!  Find someone who can explain the pros and cons of both types, traditional and hybrids. After dissecting policies for 20 years, they all have a purpose.

So, what are your alternatives? Spending all your hard-earned money on your care (skilled care today averages $120,000 a year) and applying for Medicaid?  What is Medicaid and who can get Medicaid? Do you have to be impoverished to qualify for Medicaid? If you’re considering LTC Insurance, please take the time to study it as you will be investing a lot of your money but can truly be worth it.

Bamford LTC Financial has been teaching classes for free on this subject for over 15 years, to educate consumers before they purchase anything. For more information, or to sign up for our classes, please visit www.bamfordltcfinancial.com.