Long-Term Care Insurance: An Introduction

With nursing home care in some parts of the country costing as much as $10,000 a month, a long-term need for care can deplete even the best-planned estate. As a result, many seniors buy long-term care insurance to cover this risk. One great advantage of this insurance is that most policies now cover home care and assisted living care as well as nursing home care, causing some insurance agents to describe it as “avoid nursing home insurance.”

Unfortunately, the long-term care insurance industry is still relatively young and continues to experience growing pains. Until Congress began regulating the industry as part of the Health Insurance Portability and Accountability Act of 1996, many of the policies were poor, containing bars to coverage that could make them unavailable just when needed. Some companies that went into the business with great optimism have found that they were not making money and have retreated from the business or dropped out entirely. In recent years, insurers have been hit particularly hard by the climate of historically low interest rates because companies’ profits rely on returns from investing policyholder premiums.  In addition, policyholders are living longer and fewer are abandoning policies midstream than actuaries had predicted. 

Between 2010 and 2012, three large insurers – MetLife, Unum and Prudential – ended long-term care insurance sales to some or all markets.   Companies still writing policies are raising premiums, some precipitously.  Others have put up roadblocks to claims on the policies. One long-term care insurance company in particular, Bankers Life and Casualty, has gained a reputation for not paying claims. 

Still, having the insurance can be a lifesaver for a senior needing care, as well as for his or her spouse and children. The biggest problem with policies now is the cost the premiums being out of reach for most seniors and the refusal of insurance companies to guarantee their rates. Another problem with long-term care insurance is that by the time many people purchase policies, they are uninsurable due to health problems. One solution to this problem, of course, is to purchase policies while you are young and healthy. The other solution is to shop around. Every company has its own underwriting criteria.

The website Reviews.com rates which long-term care insurers are the most affordable, deliver the most robust coverage, are best for extended care, and offer the simplest policies.