New Directions in Long Term Care Insurance

2015 saw a distinct shift in new long term care insurance policies being sold, including lower compound inflation riders to 3.5%, shorter benefit periods of typically 2-3 years and a shift to the 2/4/50 total asset protection for the NYS Partnership plan.The 2/4/50 policy includes 2 years of nursing home coverage at 100% of the daily benefit, 4 years of home care at 50% of the daily benefit and 50% asset protection.

The underwriting process looks more like life insurance now and incorporates family history, paramedical exams and blood work into the process. Also, there are sex distinct ratings now, which penalize women for living longer. The annual premium for a woman applying singly compared to a man applying singly is dramatically higher.

Despite this, long-term care insurance is more critical than ever in a financial plan. Here are some startling statistics:

  • 70% of consumers over the age of 65 will need long term care at some point in their lives.
  • 63% of Americans say that they need long term care insurance but only 13% own a policy.
  • The average cost of nursing home care in NYS is $130,000.
  • The average length of a long term care claim is 3 years.

Clients are starting to buy long term care insurance at younger ages. The longer a client waits, the less affordable it is and then “some coverage” becomes appealing. There are newer products available, such as hybrid life policies; however, the loss of inflation protection on these policies is a concern as long term care costs have increased at an average rate of 3.5% annually.

More information on trends in long term care costs and insurance can be found in this great video from Shipp Financial of Latham NY:


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