Broker Check

Long-Term Care

Long-term care insurance is the third component of risk management. Long-term care insurance protects assets in the event of a medical situation requiring extended care, which includes home care, assisted living, and nursing home care. Long-termcare is most needed by the developmentally disabled, those with catastrophic illnesses or involved in accidents, and people suffering from the effects of Alzheimer’s disease.

One out of six consumers will require long-term care within their lifetime. Though this doesn’t sound like a significant percentage, the risk of having to pay for the expensive care costs are most likely not worth it. The average cost of long-term care services has grown to nearly $75,000 annually, a number that has been rising steadily.

Unfortunately, most people are paying for long-term care costs out-of-pocket. This is by far the majority, especially when the 58% paying out-of-pocket are compared to the 17% that is paid for by Medicaid, and 13% paid by Medicare. It’s easy to see then, that only 6% of consumers own long-term care insurance. In

turn, long-term care is the least owned component of risk management among consumers. There are nine reasons for the lack of owing long-term care insurance by consumers:

  • Unrecognized Risk
  • Elderly Product Image
  • Overestimation of Health Care Coverage
  • Overestimation of Medicaid Coverage
  • Limits for High-Net Worth Households
  • High Costs
  • Other Expenses
  • Complicated Product
  • Self Insurance

Unlike health care and disability insurance, Individual products make up the majority of long-term care sales. However more employers continue to offer long-term care insurance. There are now nearly 6,000 businesses offering long-term care policies nationwide, compared to just 506 in 1992. Unfortunately group benefits don’t provide a true safety net against employee’s potential financial catastrophe, mainly due to low levels of employee participation.  There are two types of long-term care products, including reimbursements and indemnity. Reimbursement policies will pay back expenses up to a certain specified amount, whereas indemnity policies pay a certain amount per day. Indemnity policies typically range from $40-$500 a day, or $1,000 - $8,000 per month.  Due to consolidation, there are now fewer companies selling long-term care insurance compared to a few years ago. Specifically, there are 100 companies selling long-term care insurance. As a result, the top eleven long-term care companies make up over three-quarters of policy sales. In other words, there are 89 companies sharing just 19% of the long-term care market. Some of the big long-term care companies are Cetera, Manulife Financial, and Met Life.