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So Many Ways to Solve Your Long Term Care Problem

By:  Melissa Barnickle of Baygroup Insurance

The first buyers of automobiles had only one choice: a black Model T.

Decades ago, the first people buying long term care insurance faced a similar situation— there weren’t many choices. But with an apology to our feline friends, these days one could say that, when it comes to solving the problem of long term care financing, there’s more than one way to skin a cat.  

For starters, there’s traditional long term care insurance (LTCI). The product has many varieties, including facility only, home care only, shared care for 2 insureds, among other variations.

Then there’s combination policies, which combine life insurance with long term care. Not to mention single premium policies.

Finally, there are policies that instead of covering long term care, cover short-term care. And even non-insurance products which attack the problem of long term care financing without providing insurance. One typical non-insurance solution lets people buy actual hours of care with a provider network at a discount.

It would be inaccurate to consider all these solutions equal. Depending on someone’s age, health, finances and other considerations, certain solutions are better or worse, more or less attractive.   

I’m going to focus on stand-along (LTCI) long term care insurance, which many experts consider the gold standard in protection. It’s also the solution with the longest track record. LTCI is the subject of the 20th annual Milliman LTCI Survey reported a few months ago in Broker World magazine, a publication for insurance brokers.

Let me share a few of the most interesting takeaways from the survey:

  • Only 59% of LTCI applications resulted in active policies. This is due to the high underwriting declination rate of traditional policies. In other words, in about 40% of cases, an insurance company takes a pass and doesn’t offer the applicant a policy! The report says, “This low success ratio contributes to financial advisors’ reluctance to recommend that clients apply for LTCI.” 
    I believe the high declination rate for LTCI applications is one reason for the increasing popularity of other solutions–-virtually all of which have easier underwriting. However, easier underwriting does not mean better coverage; in fact, those two things are usually diametrically opposed.
    The message from the above statistic is clear: look into solutions before your health changes and you become ineligible for some types of coverage.
  • The average issue age rose to 56.7. This is the highest age since 2013. Remember, this is an average…some applicants are older and some are younger.
  • Fully 22% of applications for LTCI are the result of sales at the work site. That’s up significantly from 2015, where the figure was only 12.5%. The report gives no explanation for the increase. However, I can’t help but think that, with an average issue age for LTCI of about 57 years, many of these employees are experiencing their age 80+ parents’ long term care events first hand, and therefore may be quick to jump on offers of coverage at their place of employment.

Keep in mind, no matter how you are thinking of skinning the cat that is your long term care financing problem so-to-speak, I am willing to talk with you anytime. I’ll share with you everything you need to know to make the best decision. In fact, you could say I’ll let the cat out of the bag.  

Feel free to contact Baygroup Insurance at http://www.baygroupinsurance.com/forms/contact-us or call us at 410-557-7907 for help with all your LTC needs.