Will Long-Term Care Insurance Go the Way Of the Dodo? How You Can Prepare Yourself For Long-Term Care

It may be Long-Term Care Awareness Month, but is long-term care insurance about to become extinct?  We came across an article in The Wall Street Journal on the exit of insurers from the long-term care insurance market. It’s troubling news to anyone who is approaching retirement age and considering their options for long-term care.

MetLife Inc. said it will halt sales of long-term-care insurance, a type of coverage that repeatedly has flummoxed insurers and forced some to pay significantly more in claims than they expected.

MetLife is among the bigger sellers of the coverage, with about 600,000 policyholders, or about 8%, among the eight million who have long-term-care insurance in the U.S., according to the company and an industry trade association.

MetLife joins a parade of insurers that have exited the business rather than try to fight for customers in the small market. Many life insurers, having suffered losses in the financial crisis, have been rethinking product lines from long-term care to retirement offerings to reduce their exposure to volatile markets.

In addition, they said, customers have held on to the policies at a rate many insurers didn’t expect. Those lower lapse rates in the first years of the policy translate into more people filing claims years later.

“In any environment, it’s expensive for the companies that sell it, and it has tremendous future risks associated with it,” he said. “The current economic situation makes this an especially difficult business right now.”

MetLife Steps Back From the Long-Term Care Market

We want to emphasize that if you already have purchased a long-term care insurance policy from MetLife or any other insurer for that matter, your long-term care insurance policy is not being cancelled as long as you continue making your insurance premium payments.

However, if you are still considering buying a long-term care insurance policy, remember, the policy is long-term both for you and your insurer. It is very important to consider the stability of both the insurer and the policy’s premiums over the long-term before you put your money down on a policy.

In addition, we do suggest that you not buy a long-term care insurance policy until later in life. Many insurance agents will begin pushing the hard sell to buy a policy as early as 40, but it really doesn’t make sense for most people unless you have a chronic condition that may require earlier care. Although premiums are lower the younger you are when you first purchase the policy, buying that early will most likely result in decades of payments before you have any need to call upon your policy. As you can see, your premiums could be rising for decades before your ever need the policy, and if your insurer ends up pricing your premiums to a point you can’t afford them any more, you could end up in deep doo-doo.

Also, a long-term care insurance policy purchased too early may not cover new models of care that are likely to develop in the interim. For example, many long-term care insurance policies which were purchased 20 years ago did not cover the expenses of assisted living facilities, because those facilities did not develop until relatively recently. Buying a policy only 5 or 10 years ago may result in higher premiums, but it’s much more likely to give both you and your insurer a realistic idea of the costs of your long-term care and the long-term care that you need.

Have your bought a long-term care insurance policy? Tell us about it!

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3. Healthcare Reform: Long-Term Care and Healthcare for Seniors
4. Medicaid and Long-Term Care: The Medicaid "Spend Down"
5. Reminder: Short-Term Health Insurance is only for the Short-Term!