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What does the future hold for long-term care insurance?

Thu Apr 14th, 2016 on     Insurance Law,    

From auto and health to home and life, one of the unspoken benefits of insurance coverage is the peace of mind it grants the policyholder. Indeed, people rest a bit easier believing that even though the premiums they are paying are by no means cheap, they will nevertheless be okay from a financial perspective when it really matters.  

As we’ve explored in great detail on our blog, however, this reliance on insurance coverage is sometimes misplaced, as insurance companies frequently go out of their way to delay or deny coverage, or take actions that are otherwise detrimental to policyholders. By way of example, consider long-term care policies.

What is long-term care insurance?

In general, Medicare is meant to cover short-term stays in a nursing home or rehabilitation center following hospitalization, while Medicaid is meant cover the costs of long-term custodial care at a nursing home, assisted living facility, etc. but only if the person has essentially gotten rid of all their assets.

This is where long-term care insurance comes in, as it allows people to retain assets and also defray some of the costs of long-term custodial care, which can now reach up to $90,000 per year.

What exactly is the problem with long-term care insurance?

According to industry experts, the companies that offered long-term care insurance have made a series of missteps since these policies first hit the market in the mid 70s from misjudging how long people would need nursing home care and how long they’d live to missing the mark on their profit projections and the number of policies that would ultimately be dropped.

This, in turn, resulted in major financial losses and caused many insurers to leave the field altogether. Those that remain are now presenting their customers — many of whom are older and counting on this coverage — with three equally unfavorable options: pay higher premiums, cut benefits in exchange for lower premiums or drop their policy.

Are older people dropping their long-term care policies?  

According to a recent study by Boston College’s Center for Retirement Research, up to a third of people 65-years-old with long-term care policies have let their coverage lapse. Here, affordability was cited as one of the primary reasons for this move.

Are younger people even considering long-term care insurance anymore?

Given some of the aforementioned realities, many younger people are electing not to  purchase long-term care policies. Indeed, many are purchasing newer products, including annuities or life insurance with a long-term care benefit.

It will be interesting to see what the future holds for long-term care insurance and what seniors will do in response to these less than favorable conditions.

If you have questions about a delayed claim or concerns about a denied claim, consider speaking with an experienced legal professional to learn more about your rights and your options for holding an insurance company accountable.

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