Recent developments in the long term care insurance business have seen premiums rising or benefits decreasing.
This is occurring as insurers grow more concerned about escalating costs for the coverage, reduced interest rates available on insurer portfolios and the instability in the stock market.
This has given rise to insurers seeking alternatives to help people provide for the potential that they may need expensive care at some time in their lives.
For a long time, the axiom for LTC insurance was that those who needed it could not afford it and those who could afford it did not need it. Those at the lower end of the economic scale are likely to have the public sector provide for their LTC needs. At the other end, the very wealthy can provide for themselves.
It is those in the middle who are at risk. These people are too affluent for public assistance but not rich enough to have the security of knowing they have enough resources to provide for LTC.
We have written in the past about how life insurance coverage can help to provide a tax-effective means to supplement retirement. We do not say that annuities are not essential to provide funds that cannot be outlived but that the ability to obtain tax-free loans from a life policy can be an essential element in providing for secure retirement. Further, we believe life insurance can provide additional security in the event LTC is needed.
We also have written that life insurance is, in reality, the perfect tool for a myriad of purposes. It can provide protection against dying too soon and living too long, and for a vast number of other financial needs that may be unforeseen.
Insurers have developed and are marketing life insurance products that are designed to provide additional protection against the need for LTC. Again, we do not suggest that these policies are a substitute for LTC insurance itself. Rather, as is the case with planning for retirement, well-designed life insurance coverage can provide much additional security in the event that LTC is needed.
Moreover, such coverage provides a good hedge against other financial needs, even if LTC is not required. The death benefits can provide a good financial cushion for loved ones, and the ability to make tax-free loans from a life policy can enable policy owners to use accumulated cash values to supplement retirement or for other purposes.