Kitces: How to Fix LTC Insurance | Financial Planning
Yet long-term care coverage has a challenge: What was once believed to be a higher-cost, lower-probability event has now turned into a very high-probability event with an increasingly large volume of lower-cost claims. As a result, long-term care insurance has begun to morph from effective insurance into something that looks more like just prepaying long-term care expenses in advance — at a high premium rate and with little insurance leverage.
With long-term care insurance, the deductible can range from 0 to 365 days, but over 90% of long-term care insurance buyers get coverage with a three-month elimination period.
Yet with an average length of stay significantly longer than this, the deductible isn’t actually achieving its purpose of carving out high-frequency small claims. (Remember that in the long-term care world, a year or two is a small claim, whereas a large claim might be five-plus years of care.)
What would a more effective, higher-deductible LTC policy look like? Imagine a policy that has a five- or 10-year (or even a lifetime) benefit period, but a two- to three-year elimination period to go along with it.
Interesting article to say the least...
Yet long-term care coverage has a challenge: What was once believed to be a higher-cost, lower-probability event has now turned into a very high-probability event with an increasingly large volume of lower-cost claims. As a result, long-term care insurance has begun to morph from effective insurance into something that looks more like just prepaying long-term care expenses in advance — at a high premium rate and with little insurance leverage.
With long-term care insurance, the deductible can range from 0 to 365 days, but over 90% of long-term care insurance buyers get coverage with a three-month elimination period.
Yet with an average length of stay significantly longer than this, the deductible isn’t actually achieving its purpose of carving out high-frequency small claims. (Remember that in the long-term care world, a year or two is a small claim, whereas a large claim might be five-plus years of care.)
What would a more effective, higher-deductible LTC policy look like? Imagine a policy that has a five- or 10-year (or even a lifetime) benefit period, but a two- to three-year elimination period to go along with it.
Interesting article to say the least...