Long-Term Care Insurance: Is It Still Worth the Price?

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One of the biggest fears Americans have about retirement is that at some point, a bout with extensive medical bills and nursing costs will burn though their life savings. To protect themselves, many buy long-term care insurance policies to help cover those expenses. It's a choice many financial advisors have long endorsed.

But in some areas, long-term care insurance premiums have risen dramatically, which means retirees need to reassess whether getting such a policy is really still worth it.

To show the value of long-term care insurance, the American Association for Long Term Care Insurance recently issued a report about how much the industry paid out in long-term care benefits during 2013. The results don't just show the financial value of long-term care insurance; they also show how much the long-term care industry has changed over the decades. Most dramatically, there is now less emphasis on nursing-home care and more on letting people remain in their homes as long as possible.

The Big Business of Long-Term Care

Many Americans incorrectly assume that once they retire, Medicare will cover of all their health care needs. In reality, Medicare provides only limited benefits for skilled nursing care, and what coverage it offers usually lasts for only a short time.

Yet the odds of you actually needing some form of long-term care are high. According to figures compiled by the AALTCI , half of those who get a long-term care policy at age 60 (that includes provisions to pay out immediately for eligible claims) will end up using that policy before they die. Even if you choose a less expensive policy that doesn't start paying benefits until after the first 90 days of care, the AALTCI estimates that 35 percent of policyholders will end up using those policies.

The huge need for long-term care explains why insurance companies paid out almost $7.5 billion in claims for long-term care benefits during 2013. That was a 13 percent rise from the previous year, with benefits going to 273,000 policyholders across the nation.

Moreover, with the AALTCI saying that more than 7 million Americans own long-term care policies either on their own or through an employer, the number of policy claims will almost certainly keep climbing. Another study projects that current benefit payouts will double by 2023 and rise to $34 billion by 2033, as more people start needing to use their policy coverage.

How People Use Long-Term Care

Perhaps the most surprising thing about long-term care insurance, though, is the way that people use it benefits.

The AALTCI study shows that most people are using their insurance policies to avoid having to go to a nursing home, with more than half of all claims paid toward home-provided care. Another 18.5 percent went toward expenses related to assisted-living communities, which offer a lifestyle that allows senior citizens to maintain their independence to the greatest extent possible while still making higher-level skilled services available when needed.

The move toward home-based care marks a huge transformation in the long-term care industry. But it also reflects the wider availability of medical technology.

In the past, even getting home-care services to cover basic needs like bathing and dressing was a challenge. Now , by contrast, portable medical devices make it far easier even to get some skilled services at home -- everything from checking vital signs to performing complex medical evaluations. Specialized agencies now provide patients with a wide range of skilled nursing services in their homes.

How to Be Smart About Long-Term Care Insurance

The problem with long-term care insurance is that it can be hard to understand. As with many types of insurance, you need to be in good enough health to qualify to buy a policy, and the premiums various insurers charge differ greatly. That makes it critical to get multiple quotes.

Yet it's also important to compare policies on an apples-to-apples basis. There are many different underwriting criteria, different policies about how they reimburse for various types of expenses, and different waiting periods before you can qualify for benefits after beginning long-term care. Even the costs for policies from the same insurance company can vary widely.

Finally, be sure to ask about how much your premiums can rise over time. Many long-term care policyholders have gotten shocking rate increases in recent years, as insurers passed on higher-than-expected costs to their customers. That has put many policyholders in the uncomfortable position of no longer being able to afford their coverage after years of having paid premiums without using their policies.

Planning For Long Term Care During Retirement

You can follow Motley Fool contributor Dan Caplinger on Twitter @DanCaplinger or on Google+.

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10 Comments

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Maria-Victoria

My opinion on long-term care insurance is if given the opportunity to sign up for it, TAKE IT!
As the daughter and long-term caregiver to my mother who had a multitude of ailments, succumbing to Alzheimer's and in turn the deterioration of her mind and body, she passed away on 9/4/13 at the age of 91. In hindsight, she had received mailings to signup for long-term care insurance and her stance was - why should I have to pay for this? I won't need it, plus it is more for those without family to care for them. BIG MISTAKE! I loved my mother and her loss affects me on a daily basis, but, the toll, both to my mother and myself, physically, mentally and yes, financially was unimaginable. For over fours years straight after my mother suffered with Shingles (an extremely painful and debilitating condition) I at most averaged four hours of sleep to care for my mother. Sleep deprivation is not a good thing. In regards to her health insurance, all she had was Medicare - no supplement insurance, and has been mentioned before Medicare is very strict and limited in providing stays in Rehab/Nursing Homes. Ten months prior to her death, she suffered a "slow fall", one which I was more concerned with her legs and in fact tried as I had done numerous occasions to lift her under her arms, unfortunately, when I had taken her to the ER and Xrays were taken, they saw a broken humerus, this is the bone that goes from the elbow to the shoulder, her break was at the top which meets the shoulder. After spending hours in an ER exam room, I was asked if I felt comfortable taking her home. I said no, so I was told she would be admitted - this is where problems began, because she was considered "observation" versus "in-patient"; one of the criteria for Medicare to pay a Rehab/Nursing Home Facility was for my mother to stay in the hospital as an inpatient for three days and then be allowed to be transferred to this facility. After phone calls with my mother's primary doctor as well as hospital case worker and a nurse practitioner, my requests to speak with both neurologist and orthopedist fell on deaf ears. Long story short, the case worker asked if he could get a hospital bed brought to our home, if that would be alright, plus Visiting Nurse services. Feeling put between a rock and a hard place, plus the weather conditions were a factor in the NorthEast where we live, so I reluctanctly agreed to this, but knowing that as had been the case for the vast majority of my life, I would still be her caregiver with very little"break" let alone assistance.
I do thank her visiting nurse(s), wound care nurse and ultimately hospice care nurse who also came to visit my mother three times a week, but these were VISITS, none of these individuals stayed hours to care for her, as would and should have been the case in a long-term care facility, thereby giving me and anyone who is an at home caregiver the PROPER "break" that was and is DESPERATELY needed!
SIGN UP FOR LTC!

February 18 2014 at 9:12 PM Report abuse rate up rate down Reply
dollibug

Any kind of insurance is GOOD UNTIL WHEN AND IF YOU NEED IT.....and then it becomes a different story. I had long term disability with my employer and was laid off 2 days after I had surgery, which I had filed a worker's compensation claim. The company would not file the paperwork for my disability claim since I had filed the worker's compensation claim, only to later deny my worker's compensation claim at a later date. I tried to get this straightened out but NO ONE would help me. There were several attorneys involved and NC Industrial Commission was also involved. I ended up not being able to return to work and I had to have 5 more surgeries. Like I said, insurance is GOOD only IF you DO NOT NEED IT. Save your money.

February 18 2014 at 3:24 PM Report abuse rate up rate down Reply
hilaryevans2334

I agree that Americans fear that they might need long term care in the future and they don't have enough funds to pay for their expenses. In order to avoid this, financial advisors highly recommend long term care insurance. It is expensive by nature and the premiums continues to go up but this is still considered as a worthy investment. People should listen to ltc specialists and invest in this private insurance in order to avoid the high cost of long term care services. I do agree that ltc insurance is still worth the price because this is the cheaper way to pay for ltc compared to paying out-of-the-pocket. To those who are interested in buying coverage should start researching about long term care insurance costs now. Here are some of the resources that you can find helpful.

http://longtermcare.gov/costs-how-to-pay/what-is-long-term-care-insurance/long-term-care-insurance-costs/

http://www.ltcoptions.com/long-term-care-insurance-costs/

http://www.aaltci.org/long-term-care-insurance/learning-center/how-much-does-long-term-care-insurance-cost.php

February 11 2014 at 1:19 AM Report abuse rate up rate down Reply
TAUPOLAKE

Guarantee Trust Life (GTL) required a 105% plus rate increase from Louisiana in 2006, only a few years after the policies were initially sold. Iowa approved the following rate increases: (2008- 20%), (2009-25%), (2011 – 20%), and (2012-18%) for a total of 112.4% rate increase on the same policy series, and. It appears more increases are on the way. Projecting future LTC cost is a problem for seniors. But, this information is available to state regulators. Actuarial data clearly indicated that large increases were on the horizon, but this information is not available to policy holders. Many seniors become trapped. A policy holder saddled with a 105% increase posted the actuarial data for this policy series on the below site:

http://www.ltcinsurance.com/board/viewtopic.php?f=1&t=111&sid=8ae320998fe815ad333d305e7a0d8b1b

February 10 2014 at 11:18 AM Report abuse +1 rate up rate down Reply
Hi RON

I have had LTC Insurance for about 15 years and so far, my premium has not increased.... I chose to go with GE Insurance -- I think now it is still GE but has been spun off and is now called Genworth.. but, maybe I have been simply lucky...but no increase in my premium. I would be very very upset if there was any substantial increase after paying on if for over fifteen years.

February 09 2014 at 6:30 PM Report abuse rate up rate down Reply
1 reply to Hi RON's comment
Eileen

We also have had GE LTC (Genworth) for about 11 years and our premium increased this year for the lst time and will continue to increase for the next two years for a total of 50%. They say that they will not seek an additional rate increase for at least five years from 7/11/2013. Very disappointed.

February 18 2014 at 2:16 PM Report abuse rate up rate down Reply
Big John

My mother had this type of insurance and paid into it for many years. When she needed it they made her wait for three months before they would even start to pay off and she only used it one month before her death. They make every excuse they can not to pay. A total rip off and waste of money just like most all other insurance is. When you need it they make excuses to pay you or you have to fight them to get paid. Homeowners has become a joke as well with the motto "Use it Lose it". The entire insurance industry has gotten out of control with high prices and the "donations" they make to politicians is paying off for them but hurting the consumer. There needs to be some strict controls put in place and stop the corruption at the state and federal level.

February 09 2014 at 3:55 PM Report abuse +2 rate up rate down Reply
nanetha

https://www.longtermcarelink.net/eldercare/long_term_care_insurance.htm This is an excellent link with facts not listed in this article. Highly recommend read!. Although reluctant, I purchased LTC a few years ago and I'm very glad I did. However my circumstances warranted the purchase, others may not....

February 09 2014 at 10:37 AM Report abuse +1 rate up rate down Reply
abeth118

I was fortunate enough to purchase outright a long term care policy. It took 10 years to pay it off and I am thrilled to have it. I now need day and evening caregivers in my home and it's all covered. I also included in the policy a 5% cost of living increase once a year. The policy includes in-home, rehab and nursing home care. The premium never raised their prices from start to finish. Most, if not all, companies have discontinued outright purchase of LTC policies.

February 09 2014 at 10:12 AM Report abuse +1 rate up rate down Reply
1 reply to abeth118's comment
Big John

You are an insurance agent, nice try.

February 09 2014 at 3:56 PM Report abuse +1 rate up rate down Reply
hoffhort

We are hoping we will have enough money to buy into a continuing care retirement community with different levels of care. Saving for this seems to us like a better idea than paying for long term care insurance. The buy-in isn't cheap, but once you are in, you are in, and these can be very dynamic places. However, as the senior years descend on us, we're hoping not to have to make this move till we're 90...

February 08 2014 at 7:46 PM Report abuse rate up rate down Reply
theurbanshaman

Long term insurance saved our family when my Mom needed professional care... However, she purchased it when Assisted Living and Nursing Home rates were cheaper. So, she paid for a $100.00 per day policy. By the time she needed it the rates were triple. It helped but...

The average price for Assisted Living and Nursing Homes (2013) in California are $60,000.00 - $94,000.00 per year... The usual stay is 4 - 5 years which can bankrupt your loved ones.

So when purchasing Long Term Care Ins., make sure your policy will cover your expenses and make sure you add in the inflation factors.

February 08 2014 at 3:46 PM Report abuse +1 rate up rate down Reply
1 reply to theurbanshaman's comment
ga7smi

loved ones don't have to pay the bill - smart rich people give away their money before they need long term care

February 08 2014 at 7:37 PM Report abuse -1 rate up rate down Reply