Imagine purchasing a long term care insurance policy to protect against the cost of in-home, assisted living and nursing home costs and 20 years later, the insurance company has informed you of a significant premium increase. Now that you are in your late seventies and unable to purchase a new policy, you have really only two options: pay the higher premiums (if you can afford to) or cancel the policy. If you cancel the policy, how do you protect your estate if you should need long term care? A recent Wall Street Journal (“Millions Bought Insurance to Cover Retirement Health Costs. Now They Face an Awful Choice”) explains the impact on families facing these increases in long term insurance premiums.
Due to very poor underwriting, the long term care insurance industry is in financial turmoil. Only about a dozen or so companies remain, down from over a hundred. Those that still exist are increasing their premiums significantly – sometimes nearly double. With more than half of U.S. adults at least 65 years or older projected to need nursing home or care services, what should be people do to protect their estates? As discussed in previous blogs, ignoring the problem or relying upon Medicaid is not recommended. With nursing home costs averaging approximately $100,000 per year, self-protection is still recommended including considering using a hybrid long term care and life insurance or annuity policy.