Is Long-Term Care Insurance Worth It?

With Premiums Rising & Benefits Dropping, Is Long-Term Care Insurance Still Worth It? 

In a recent Wall Street Journal article on the shake-up of the long-term care market, Sally Wylie, 67, a retired learning specialist who lives on Vinalhaven Island, Maine says that over the past two years, the annual premium for her and her husband’s insurance has increased by more than 90%. She says that in order to keep paying their $4,831 premium on a policy that promises to pay out as much as $268,275 per person, “she has taken on a part-time landscaping job. The couple has delayed home maintenance, travels less and sometimes rents out their house.”

The Wylie’s story is dramatic, but it is not unusual. The premiums on outstanding long-term care policies are increasing as the companies who sold long-term care policies struggle to keep promises they made in the 1980s and 90s. Long-term care insurance was a new product then, and when the actuaries at leading insurers estimated future costs they didn’t expect people to live as long as they are, or to hold on to polices as long as they have. Nor did they anticipate that the rise of luxury assisted living facilities would persuade many people that being in a nursing home or putting a family member there was not so bad.   
Today, long-term care insurance costs more and covers less, so is it still a good investment? For many people, the answer is yes. 52% of all adults over the age of 65 are projected to spend time in a nursing-home or need some other form of long-term care in their lifetime. 

Genworth, one of the leading providers of long-term care insurance, estimates that someone living in  Virginia would pay an average of $85,775 for a semi-private room in a nursing home or as much as $94,900 for a private room. In-home care costs could be $45,440, based on 44 hours per week of care. Adult daycare (8 hours a day, 5 days a week) could cost up to $17,649. And assisted living facilities could cost $54,090 per year. This is in 2017 dollars. Genworth estimates that these costs will rise 2-5% each year. Without proper planning, all but the wealthiest families will see their savings disappear trying to cover these costs. 

Long-term care insurance is still a good option for many middle-class families because the only other way to pay for long-term care is to go on Medicaid. Going on Medicaid also takes some advance planning, so whatever you think your plans might be, it is time to talk to an experienced estate planning attorney. 
One of the good things about the current crisis in the long-term care industry is that companies and the bureaucrats that regulate them have learned their lessons. They aren’t going to approve plans that don’t update their actuarial tables to reflect modern realities, or that don’t adequately explain to the purchaser how much the company might raise premiums or lower coverage in the future. In a way, those of us who are making plans now, while there is so much bad news about the long-term care insurance market, are in a better place than we might realize. 

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