Long term care is something that many people hear about. However, they are unsure whether or not they should purchase it. Many people do not want to think about it. Others don’t know enough about it and are concerned about making a wrong decision.
What You Should Consider
When purchasing long term care insurance, it is easy to overpay. The cost of policies varies among insurers and the level of coverage.
Good long term care policies are expensive. Many insurers have gotten out of the market. Also, since long term care insurance is held by a small percentage of the population, it is difficult for the insurers to spread their risks.
The risks associated with long term care tend to be more expensive, often reaching into thousands of dollars per claim.
Just because you “lock in” a low premium by purchasing long term care insurance at an early age, the insurer can still hike rates on groups (e.g., age groups) covered by the insurance. This usually means that older persons will see these increases, which will be more than the rate of inflation.
For example, we know of one 90-year-old who pays almost $9,800 per year for long term care insurance. Her annual premium in 1989, when she purchased the policy, was $428. This is a 16% annual increase in the premium cost. Of course, she has been reluctant to drop the policy over the last several years, since she is more likely to need it in the near future.
When purchasing a long term care policy, you also have to be mindful of the financial health of the insurer. Since you sometimes purchase a policy many years before it would be needed, a financially healthy insurer might not be financially sound when you need the policy’s benefits.
Most long term care policies were sold in the 1980s and 90s. Thus, there is also a scarcity of information about how the failure of a long term care insurer would impact policyholders in the long run.
You also have to make note of the facilities for which the policy will provide reimbursement for care. Long term care insurers often have narrow definitions for the categories of facilities and the care provided. You might want a different level of care than the policy would provide.
While individual circumstances vary, we believe that the current environment does not make long term care insurance a good option for most people. However, as always, we will continue to monitor this situation to see if circumstances with this insurance change. If conditions change, we can re-address whether or not you should purchase this insurance.