Long Term Care Insurance

Long Term Care insurance provides protection against the calamitous costs of caring for individuals with disabling mental illnesses or physical impairments. This coverage has been available for over fifteen years, but has not yet received the widespread public acceptance that some proponents had expected. In our opinion the slow development of the market is understandable: the insurers have assumed that the general public is the natural market. We see the market as much narrower and think LTC coverage has the greatest appeal - and utility - for executives, professionals and other individuals with assets of $2 to $10 million that they want to protect.

Tax law changes in 1996 (HIPAA '96) and in 1998 (TTREA '98) made the economics of LTC more attractive for many buyers by adding tax incentives for sole proprietors, partnerships, and contracts purchased by corporations. Lowering the after-tax cost of coverage created an incentive to buy, but the primary motivation to acquire coverage should come from recognition of the reality of the risk and an understanding of how LTC insurance helps a policy owner cope when long term care is needed.

Click on basics for a short outline of the main features of Long Term Care insurance.

We have enhanced our consulting capabilities by acquiring powerful software for use in identifying, comparing and evaluating the features of over 90 LTC contracts. We also have in-house the quote engines of 12 LTC insurers.

By completing and returning a personal data form a viewer can request the estimated LTC premium for a particular combination of contract features. (Please note that the form has several “drop down” windows, recognizable by a down arrow on the right side of the window, that allow the viewer to specify the daily maximum benefit, elimination period and other contract features.) Viewers who specify a set of design features and other input assumptions will receive a preliminary economic assessment of the contract features and premiums of three long term care insurers that offer the chosen LTC contract design.

We have expanded our LTC Economic Analysis model. Version 2006-1 combines LTC policy design features, actuarial estimates of life expectancy, tax and economic assumptions and scenarios for the probability of LTC claim, duration of care and the situs of care. A specimen of its input variables. The model derives cash flow and present value projections based on a chosen set of inputs. It includes an estimate of the impact of extended care on one's estate.