Long Term Care Insurance Becoming Tougher For Women To Purchase

It’s true that men have always paid more for life insurance then women based simply on the fact that women statistically live longer. A similar pricing structure is about to come to the long term care insurance industry, only in favor of men this time around, and for the exact same reason.

Women Live Longer and Will Pay More

On average, women outlive men by five to seven years. The older we become the greater the chance that we will one day be in need of Long Term Care (LTC). Statistics show that currently about 70% of the residents who live in a nursing home are women. Women represent almost 80% of all individuals living in assisted living facilities and two-thirds of those receive home care. According to one LTC insurance executive, $2 out of every $3 paid in long-term care claims are for women.

The long-term care insurance industry was started in the 1980s and many companies rushed to get into what they thought would be a lucrative market. However, based on untested underwriting practices, a low interest rate environment and greater utilization than had been expected, many companies have seen much higher claims than they anticipated.

Many companies, including Prudential, MetLife, Allianz and others, have stopped selling new long-term care policies altogether and those with existing coverage are experiencing hikes in their premiums by as much as 40%.

Genworth is the nation’s largest long-term care insurance provider and is the most experienced, as well. They are, however, making some changes. In order to better underwrite future policies (i.e. maximize their profits), Genworth will soon institute “enhanced underwriting.”

Qualifying for LTC Will Be More Difficult

Leesa Fons, an Insurance broker in the Sacramento area who has been involved with LTC Insurance for 20 years explains that “The new enhanced underwriting means that new LTC insurance applicants will be subject to a full paramedic exam which includes blood pressure readings and lab work. This is similar to the exam used to screen life insurance applicants. A number of health conditions will be tested for; some of these include diabetes, heart disease, and hepatitis. This will make it more difficult to qualify for coverage.”

“Since dementia and mental impairment are a leading cause of Long Term Care claims, insurers will soon require an in-person interview where the examiner will have an opportunity to observe firsthand the proposed insured’s mental acuity and residential surroundings,” Fons said.

Barbara Hanson, an insurance broker in Santa Cruz, California, who has specialized in long-term care since 1995 recently said, “People who are waiting to buy a long-term care policy may be less able to pass underwriting as it is becoming more stringent. I have a client who was able to get covered a year ago, but was declined for an improved policy by the same carrier this year due to health underwriting changes the carrier enacted last spring. When one carrier moves in this direction, others will follow.”

Another change that will impact women is a so-called “gender pricing strategy,” which will raise rates for single women by as much as 40%.

Consider LTC Coverage Now

For individuals considering long term care insurance Fons recommends that they “make it a priority to discuss the issue with your financial advisor in the near future. If obtaining a policy is appropriate for you; apply before April 1st, 2013.”

Hanson responded, “The younger you are when you apply, the lower the lifetime cost. With the upcoming changes in underwriting and rates, it is paramount to investigate the option now rather than later.”

Hanson went on to say, “To prepare for old age without the protection of LTC insurance, women need to have access to a substantial nest egg or high monthly income. A reverse mortgage may be helpful for those with equity in their home when the nest egg is gone. However this may not be a good idea for others. Relying on family for 24/7 care is usually not possible, or can be seriously draining on those we love.” The Medicaid system is still available to provide a safety net for those with little assets or income.

Fons pointed out “A major concern for women is not only outliving their wealth… but outliving their health. There isn’t a more significant drain on assets than having to pay for the cost of an assisted living facility or professional care givers.”

No one wants to be dependent on others for their care in their later years, but the longer we live, the greater the chance of having decreased physical or mental abilities that will require assistance. Long-term care insurance isn’t for everyone but if ever you think you might consider it, do it now rather than later!

About the author

Michael Chamberlain, CFP®

Hello. My name is Michael Chamberlain CFP®, the principal of Chamberlain Financial Planning and Wealth Management. Our firm is “fee-only” with offices in Sacramento, Campbell and Santa Cruz California. “Serving clients from the mountains to the sea.”

Our mission is to help clients realize their full potential today while planning for an abundant tomorrow through comprehensive financial planning and collaborative decision-making.

As an experienced investment and planning professional, I have had the privilege of being interviewed by and contributing to hundreds of articles in such publications as Money Magazine, Financial Planning Magazine, ABC.com, Forbes.com, Nerdwallet, NASDAQ.com, Yahoo Finance and more.

I hope that you spend some time at the FiGuide site and learn more about the financial matters important to you. To learn more about our firm, visit our website www.chamberlainfp.com or give us a call at 800-347-1340.

5 Comments

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  • We have been a team of volunteers and establishing a fresh structure in the online community. Your site supplied all of us by using useful info to be effective on. You could have done any formidable course of action plus your overall group might be thankful to you personally.

  • I believe that it’s just fair for long term care life insurance companies to increase the benefits that women will get. Women who’ll purchase this long term care plan will gain the kind of care and assistance most of the people who ignore LTC won’t have.

  • My mother paid into longterm care insurance for years. We decided it was a ripoff. It doesn’t start paying until she’s been in the nursing home for 3 months. And let’s face it, most people don’t go to a nursing home until they are really in bad shape. So how many make it past 3 mohths? I don’t have the statistics, but I’m guessing the insurance company makes out like a bandit on these policies.

    • Maggie – Insurance IS a ripoff…that is, until you NEED it. I hear you but look at it this way…we pay automobile and home insurance not just because it’s illegal (auto ins.) not to or because our mortgage company requires it. We pay it because we might need it and hope we don’t. Hence, most of the time if we are lucky it IS a rip off (though it helps one sleep better). Also, most reputable long term care (LTC) companies have a clause or rider where home based care bypasses the elimination (i.e. “N months” waiting) period. Most folks want to and do start care at home and the policy pays from day 1 (it even starts the counter on the elim period if nursing home care is needed). It’s like anything. Buyer beware and do the homework and/or work with a reputable LTC broker. Start early and study up on how LTC works. Look, I hear what you are saying. I’m not a broker just a LTC owner consumer at 54 years young. Our health system in this country is atrocious and we should be ashamed of ourselves as a nation. Until we get our health system ‘sheet’ together in this country LTC is our best option right now to not rely on Medicaid (seriously what kind of high care do you really think Medicaid will supply, very little). I just took out an pretty good LTC policy from MassMutual and hope it does indeed become a “ripoff” as that will mean I never had to use it. But if I do need it then it will be manna from heaven.

      • So true! If I could promise my clients they would never need long-term care in the first place, most would gladly pay for THAT guarantee!

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