The Death of Traditional Long Term Care Insurance

Today, fewer and fewer companies are offering traditional long term care (LTC) insurance; the reason is because most insurance companies initially underestimated how long individuals would require LTC benefits. In fact, women today are living an average of 6 years while receiving long term care. Depending on where you live, in-home care can run roughly $5K per month, assisted living can be in the $6-8K/month range, and nursing homes can skyrocket to $14K+/month. It’s not surprising that very few people can afford those costs out-of-pocket. Therefore, the insurance companies are re-vamping their policy options into something that looks more like this (numbers are just for example):

Pay a $100K premium either up front or in installments, then one of three things happens:

• You change your mind and your $100K premium is returned to you
• You die before using your LTC policy and your beneficiaries receive a $250K death benefit
• You use the LTC benefit and have up to $500K to use for LTC

The pros of this type of LTC plan for a policy holder are that a) your premium never increases and b) there is a death benefit. These are untrue of traditional policies. Once your children are self-sufficient, it may make more sense to move the money from your life insurance policy into a long term care option like this one.