Nervous about the cost of long term care?

Doug Horn

It seems many of us can create the feeling of worthlessness in a number of ways. For some, it is the purchase of a home that is too large and the owner finds themselves feeling ‘house poor’ once all of the monthly costs are paid. Others have purchased a number of real estate properties and once again the phrase of being ‘real estate poor’ may come up. There is still another area where this feeling can be created and that is being ‘insurance poor.’

Today, the availability to purchase insurance is very large and for almost anything. There are the traditional policies such as life, home, automobile, and disability. Additional types of coverage include boiler, marine, hired auto, theft, and even trip insurance. If there is a “risk”, then in many cases there is an insurance policy for that risk.

For those in their fifties and older, the thought of long term care and its costs has most likely been a part of the conversation at some point. This is another area where the burden of part or all of the expense can be shifted to an insurance company should the need for care arise. Prior to jumping in and purchasing a policy, many individuals face the hurdle of annual premium costs. Depending upon the age at the time of application, health, location, company, and benefit levels, the premium for this protection can range from $1,500 to $8,000 or higher. Clearly, for those who are younger and healthier when the application is taken, the annual costs will trend to the lower end of the range.

When I am speaking with someone regarding this type of coverage and I notice the eyebrows went up when I disclose the premium, I always ask if they would rather pay for the care? The cost of long term care insurance can become too large for many if they wait until they are retired before considering this type of coverage. The portion of the annual budget could be as high as 15 to 20 percent. Those in this situation often elect to go without coverage as they just cannot see paying that high of a cost for something which may not happen. They are not the only ones that may be without long term care insurance.

The Investment News reported on November 11th that MetLife plans to halt the sale of their new long term care policy effective January 1, 2011. They are not the first carrier to pull out of this market or change their policies, thus reducing their own risk of policy claims. The article quotes, “Insurers including CNO Financial Group Inc have been burned by policies sold in the past when they underestimated the number of claims, cost of care, and life expectancies of their clients.” Insurance carriers face substantial added costs when these factors are underestimated, especially when many policies do not have a payment cap.

If the insurance industry with all of their data and actuarial experience are underestimating the number of individuals going on claim, cost of care, and life expectancy, how reasonable is it for an individual to determine they do not need the coverage due to the presumption of a low risk of having a claim? It is my opinion that it is likely many baby boomers will be facing another financial crisis during their retirement due to the lack of long term care coverage.

The apparent withdrawal from the long term care market by MetLife should be a wake-up call to seniors who have assets worth protecting and are without current coverage.

For assistance with portfolio allocations, insurance, estate planning, or investment management contact me at Quality Financial Concepts or one of the other Certified Financial Planners in our area. To continue a personal quest for education, you can also view our learning center on our website, There you will find articles on a variety of topics, on-line seminars, calculators, as well as a host of other free tools.

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