The long-term care insurance business has experienced ups and downs of late—and it’s still in a state of flux, writes columnist Elizabeth O’Brien in her Retire Well column on MarketWatch.
But, given that the vast majority of Americans don’t have long term care insurance and many have saved on average, less than $25,000 for their long term care expenses, it’s a product group people will need to learn to navigate, she says.
“For many of us, relying on family for home-care help won’t work out in the long run,” O’Brien writes. But, she says, even despite “a bit of an image problem,” there are considerations worth noting, such as the impact of interest rates and the losses many providers have experienced due to rates plummeting as a result of the financial crisis.
“Low rates have reduced the returns that insurers have earned on invested premiums, making long-term care insurance less profitable for them,” O’Brien explains in her column. “Insurers also assumed that many more people would drop their policies than actually did. More people sticking with the policy means more people eventually go “on claim,” leading insurers to face larger payouts than they anticipated.
The long term care insurance considered by most isn’t actually medical care, she explains, but will cover help with activities of daily living and/or custodial care for those who experience dementia.
The industry has had no shortage of problems, yet it also can’t be ignored and there are some ways policyholders today can benefit by doing their research and making the most of a policy, such as writing off the benefits.
“…while such coverage isn’t for everybody, almost anyone planning for retirement ought to carefully consider whether they might need it—after all, burying our heads in the sand about our future care needs is hardly a good alternative,” O’Brien writes.
Written by Elizabeth Ecker