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A Critical Safety Net Is Shrinking

When we are young it is difficult to peer into the future 20, 30, 40 or more years and imagine needing physical assistance with some of the basic activities of daily living such as dressing or feeding ourselves. The reality of the matter is that many of us will need assistance at some point in our lives, and as medical advances contribute to longer life spans it becomes even more likely that we will need at least some help at some point in our lives. Planning for this stage of life is becoming more complicated as many insurers who provide long-term care insurance policies have recently exited this market.

The inspiration for this post came from an article that a client sent to me recently. The article discusses how Prudential, the Unum Group, and MetLife have all exited the long-term care insurance market. (Prudential will still sell group plans.) Many other carriers have raised their premiums so much that they have effectively exited the market as well. Several years ago John Hancock dominated this market and was the carrier of choice for myself and many of our clients. Now, Hancock does not even make the list of carriers that my agent will put on the quote when one my clients is considering a new policy.

How do the changes impact you? When someone reaches the decision to purchase long-term care insurance (see my Jan. 2011 post here) they now have fewer choices. Fewer choices almost certainly means higher premiums.

Another change that is occurring is that insurers who are still in the market have dramatically tightened their underwriting standards. I am increasingly finding that people under the age of 60 are being denied this insurance for a variety of health-related issues. I was interviewed this week by a journalist and was asked when people should consider the purchase of long-term care insurance. My answer was that as soon as someone has enough assets that they need protection for other family members. That means that regardless of your age (yes, even those under age 40!) should be thinking about this type of  insurance. If you are waiting until you are in your 50’s in may be too late, and quite expensive.

A great long-term retirement plan includes planning for the stage of life where we could use some help. No matter how great your investment portfolioperforms, the risks associated with needing long-term care can be quite significant. If you have not thought about these issues, I urge you to give them some consideration.

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