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LTCI is worth it

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The other day, a newspaper in my area — Southern California — ran a column about two local residents who are facing a sharp increase in the cost of their long-term care insurance (LTCI) policy.

Maybe you’re seeing similar articles in your paper.

When people ask about those articles, what do you say?

Here are my thoughts.

First, in some of those articles, the consumers and the writers might not have a clear understanding of what the increase really will be, or who allowed the increase.

Doing a little research might help you put what happened in context.

My understanding is that, in the article in my local paper, the couple had a policy written out-of-state. California insurance regulators had no responsibility for the increase.

Second, one way of looking at the increases is that the policyholders received a heavily discounted price on their policies in the period before the increases took effect, or will take effect.

Getting LTCI coverage for half of what, from an actuarial perspective, the coverage ought to cost is like buying a $30,000 car and paying on a $16,000 loan for half of the loan period. What a deal!

Third, the consumers who hold the policies are still receiving a great value at the increased premium, because the issuers are not likely to get close to break-even results on these policies, even with the rate increases.

Fourth, the truth is that some of the increases we’re seeing are truly excessive in my opinion, no matter what the reasons are. We have to acknowledge that.

Fifth, as far as we can tell, the policies we are selling today are priced conservatively and correctly.

Sixth, if you and consumers don’t buy what I’m saying, one alternative is to sell linked products that offer a combination of guaranteed premiums and benefits linked to long-term care triggers.

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