Jesse Slome, director Long Term Care Insurance Association

A study released today reports that the largest open long term care insurance claim made by a female policyholder has reached $1.8 million in paid benefits.  The largest claim made by a male policyholder now exceeds $1.3 million in paid benefits.

“Long term care insurance companies paid $6.6 billion in benefits in 2012 to a record 264,000 individuals,” explains Jesse Slome, director of the American Association for Long-Term Care Insurance (AALTCI).   Roughly half of newly opened claimants received benefits for covered home care services with the rest paying for care in assisted living communities or skilled nursing homes.

The Association’s annual claims analysis revealed that the female claimant has received benefit payments for 15 years and nine months as of December 31, 2012.  “Her claim which now exceeds $1.8 million started three years after she purchased a long term care insurance policy,” Slome explains.  “Consider that she paid $881 yearly for the coverage with payments ending when her claim began.”

Long-term care insurance is not the lottery or something you hope to collect on, Slome notes.  “But, if you need care for a few months or for many years, benefit payments from your insurance can help relieve the financial and emotional toll that so many families face.”

According to the organization’s study, the majority of new long term care insurance claims in 2012 started after the policyholder was age 70.  ”Over two-thirds (68%) of new claims began after the policyholder turned 80,” Slome reports.  “About one-in-four (23.5%) started their claim between ages 70 and 79.  The most common reasons for a long term care insurance claim are Alzheimer’s disease, stroke, arthritis, circulatory issues or injury.”

The largest open claims reported by leading insurers ranged from $322,286 to $1.8 million.   “Several of these very large claims began just a few months after the person purchased their policy,” Slome says.  ”People mistakenly associate long term care with care needed by the elderly.  Accidents, injuries and illnesses also can result in a need for long term care.”

New Options Reduce Long Term Care Insurance Costs

“Consumers are increasingly aware of the value of long term care insurance and options offered by several leading insurers now make this coverage more attractive to a broader population,” acknowledges AALTCI’s Slome.  “Newer choices allow couples to share in a combined pool of benefits and enable younger individuals to lock in lower cost coverage that they can increase in future years without having to meet health qualifications.”

The trade group recommends consumers consider this protection prior to age 65 because of the need to meet health standards.   To get the best coverage and options, AALTCI advises working with a knowledgeable professional.  Slome recommends asking two questions; how many years have you been selling long-term care insurance and how many insurance companies are you appointed with?

“It can takes at least three years but ideally five or more years to really acquire the knowledge necessary to become a specialist,” Slome shares.  “A good broker specialist will be able to compare policies from at least four or five long term care insurance companies.”

To access free guides outlining ways to reduce long term care insurance costs or to connect with designated long term care insurance professionals for no-obligation cost quotes call the organization at (818) 597-3227 or visit the Association’s website at www.aaltci.org/guides.

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According to the 2013 National Long-Term Care Insurance Price Index released today by the American Association for Long-Term Care Insurance prices for long-term care insurance policies are higher as a result of increasing care costs and significantly lower interest rates that factor heavily into policy prices.   In 2012, the organization noted identical coverage cost $1,720 annually.

“Persistent low interest rates and yields on fixed income investments continue to push costs for various insurance products higher,” explains Jesse Slome, AALTCI’s executive director. “Long term care insurance policy sales are up as consumers recognize the importance of planning and show greater acceptance of policy options that offer greater affordability.”

The Association analyzed costs for 12 leading insurers for single individuals and couples between ages 55 and 65.   Rates varied quite significantly for virtually identical policy benefits Slome reported.   “For a 55-year-old single policy applicant the highest priced policy cost 87 percent more than the comparable lowest priced policy,” Slome notes.  “For a couple both age 60, there was a 92 percent difference and no single insurance company always had the lowest price.”

Slome advocates a “Good, Better, Best Approach” to long term care insurance protection that offers greater flexibility and affordability.  “There is no one-size-fits-all policy choice that suits everyone,” Slome advises.   “Some protection is always better than none and coverage that does not include a costly inflation growth option is an affordable option,” Slome says.   According to the Association study, a couple where both spouses are age 60 will pay a total of $1,816 annually for $162,000 of coverage for each person.  “A good long-term care insurance option takes into account the future availability of savings, Social Security benefits and investment retirement income to supplement insurance coverage,” Slome explains.  “Increasing benefits are not an option that everyone today needs or wants to pay for.”

For the first time, the Association’s Price Index examined rates from insurers offering a Future Purchase Option (FPO) that allows the applicant to lock in their health insurability and add to their coverage periodically.  “A better approach is selecting a starting point for benefits that can be added to later where underwriting won’t get in the way,” Slome advises.  “The FPO option adds about five percent to the cost but offers enormous value in terms of future flexibility.”   Not all insurers offer this option, he shares, and currently and the Association found a 40 percent price differential between the lowest and highest priced policies with this feature.

Historically, most long-term care insurance policies purchased by individuals have included the added option that increased benefits to keep pace with growing care costs.   “Five percent was established as the norm in the 1990s when double-digit inflation was a recent memory but much has changed over 20 years,” Slome explains.  “Today, a three percent yearly increase in benefits is considered the best option for those willing to pay the higher cost.”  A couple both age 60 will pay $3,725 yearly for coverage that grows to $329,000 for each when they reach age 85.  Comparable coverage cost $3,381 according to AALTCI’s 2012 Price Index, a 10 percent increase.

“The Good, Better, Best approach to long term care insurance planning makes enormous sense today,” Slome concludes.  “The timeworn one-and-done approach to long-term care insurance planning worked when buyers were in their late 60s and early 70s,” Slome concludes.  “With typical LTC insurance buyers now in their mid-50s, flexibility and the ability to change as personal and economic circumstances change is not just desired, it’s significantly more affordable.”

“There’s never been more interest in long-term care insurance as millions recognize the costs associated with living a long life,” states Larry Moore, Director of Marketing for American Independent Marketing, a leading national marketer that assisted the Association in compiling the Price Index information.   “With more options and ways to make protection affordable available today, long-term care insurance can be far more attractive than many people think.”

The complete 2013 Price Index will be published in the Association’s 2013 Long-Term Care Insurance Sourcebook.  For more information, visit the American Association for Long-Term Care Insurance’s website at www.aaltci.org or call (818) 597-3227

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