Factors in the Industry
Approximately 100 insurance carriers now offer LTCI. As demand grows, new providers are jumping on the bandwagon. Simultaneously, other carriers are leaving the business.
The industry is now becoming more conservative. Carriers learned from experience that liberal underwriting and the introduction of new policy generations required higher premiums. Some learned the hard way: they priced their policies incorrectly—and found that profit margins did not provide sufficient capital returns.
If one of your clients is planning to get LTCI, it doesn't pay to stall. Premiums will not be lower tomorrow. Furthermore, an applicant must be in good health to qualify, so it makes sense to buy coverage while still relatively young and healthy.
Changes in the Product
The good news is that carriers are unveiling innovative policy options, including premium payment alternatives, return-of-premium riders, and cash benefits.
Until recently, benefit payment choices took one of two forms: reimbursement or indemnity. Under the reimbursement model, benefits are paid only for incurred expenses, up to the maximum benefit. Under the indemnity model, benefits are paid at a predetermined daily amount, regardless of expenses incurred. Both methods require proof that services are provided by a certified caregiver.
The newest option, cash benefits, is much more flexible. Once the insured's physician verifies eligibility, there are no caregiver requirements. Insureds may use the benefits however they like—say, to reimburse non-certified caregiving relatives or even as a source of income.
For high-income professionals who can't get as much long-term disability income coverage as they'd like, cash benefits make an ideal supplement. In addition, eligibility requirements are less restrictive, and unlike with LTD, benefits are never taxable.
With government programs already strained, it's no wonder lawmakers are offering up LTCI as an affordable alternative. Going forward, it will primarily be up to the individual to finance his or her own long-term care.
What does that mean for accountants? More and more, LTCI will become an essential part of financial planning. It will be essential to know the product and stay on top of developments. The times they are a changin', but long-term care insurance is here to stay.
About the Author:
Brian Gordon, CLTC, is Vice President of MAGA, Ltd., an independent long-term care insurance agency based in Deerfield, Illinois. You may reach him at 800-533-MAGA or maga@magaltc.com.
Contact Information:
Author: Brian Gordon, CLTC, Vice President of MAGA, Ltd.
Corporate Address: 155 Pfingsten Road, Suite 105, Deerfield, IL 60015
Website: www.magaltc.com
Email: maga@magaltc.com
