Long-Term Care Insurance Has its Own Challenges

Written by: Scott Sery

We are not any healthier than those who came before us.  But we are living considerably longer.  Thanks to modern medicine we have ways of keeping people alive for many years past when they naturally would have died off.  Because people are living well into their 80’s, 90’s and even past 100, long-term care insurance has become quite the hot topic in the past 20 years.  Like all insurances it is useful in some situations, however, it is not for everyone.


Long-Term Care insurance is not just insurance for the elderly.  The need for long-term care is based on whether or not the individual can perform one of the six activities of daily living without assistance (those are: eating, dressing, bathing, toileting, walking or getting into a wheelchair, and continence).  For those who have trouble doing at least two of them, they are considered in need of long-term care.  Those who require long-term care are usually in nursing homes or assisted living facilities, and they can be of any age.  But as you know nursing care is quite expensive, averaging nationally around $75,000 per year.  In order to pay for this assistance an individual needs to pay out of pocket, spend down their assets and use a Medicaid approved facility, or have Long-Term Care insurance.


Long-Term Care coverage is issued like a disability insurance policy.  There is a waiting period before it will start to pay out (usually 3 or 6 months).  After the period is over, it will pay directly to the facility up to the amount that the individual purchased (usually $50 to $500 per day).  For example: The client owns a policy that pays $4,500 per month toward his care starting 6 months after a physician declares he needs it.  During those first 6 months he either must pay out of pocket or a family member will have to take care of him.  Once the policy starts it will pay a maximum of $4,500 per month until he dies (many policies, however, have a 3 or 6 year limit on the benefit).


There are many critics of Long-Term Care insurance.  The primary response being that it is way too expensive for most people to own.  Another criticism is that many companies failed to price it properly and now they have stopped selling the coverage, or they have raised their premiums dramatically.  Even though people are living longer, many are not requiring even assisted living care.  So as people get older they may not use this insurance that they have faithfully spent thousands of dollars on.  And as anyone who has dealt with filing an insurance claim knows, insurers are in the business of collecting premiums, not paying them out.  It can be difficult to prove that the insured is having trouble with their activities of daily living.


Criticisms aside, LTCi still has its place.  Those who will want to purchase the insurance are those who have significant assets that they want to protect.  Instead of paying money to a nursing home, they want to give it to their heirs.  And even spending just 5 years in a facility can rapidly drain anyone’s savings and retirement accounts.  But the coverage is not perfect, and the insurance companies are still relatively new to the game.  The coverage is expensive, and there is always the chance that you will not even need to use your policy.  But like all insurances, it is better to have it and not need it than to need it and not have it.  If you are looking into LTCi, make sure you choose a company that is financially fit so you are not stuck with an 85% rate increase one year.


Long-Term Care Insurance Has its Own Challenges

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