Is Long Term Care Insurance going the way of the dinosaur?

Much has been made about the slowing sales of Long Term Care Insurance (LTCI) in 2013 and 2014, and for good reason. 2014 is on pace to be the slowest sales year for LTCI in 20 years. To put that in perspective, 20 years ago President Clinton was in his 3rd year in office, OJ Simpson was arrested and Google wouldn’t be created for another 4 years! It is a good question to ask if LTCI will still be around much longer and should you consider buying it?

Despite the marketplace sales declining by 30% we are seeing growing demand and interest. In fact, LTC Consumer’s parent company, MasterCare Solutions, Inc., is having their best sales year in 26 years!! Why?

Changing consumer marketplace:

Long Term Care has largely been sold in a face to face, kitchen or office table environment. A consumer expresses interest, then an insurance agent calls and sets an appointment to meet with them and sell a policy. But in today’s age, consumers want to research and buy electronically, on their terms. Unfortunately, the long term care marketplace has largely ignored this trend and many are still trying to sell like they used to. This is one of the reasons we launched LTC Consumer; to provide unbiased information and innovative tools to allow consumers to research on their terms and work with whom they choose. Now, nearly 60% of MasterCare’s entire sales are from consumers buying over the internet and phone.

Rising stock market:

Many are surprised to hear that insurance typically has an inverse relationship with the stock market. When the stock market is good, people feel flush and think they can save and invest their way to security. When the market is down, people start looking for guarantees and insurance provides that. 2013 was one of the strongest bull markets on record and many investors have seen their portfolios grow, which makes them less interested. If you look back in history the stock market runs in 7 year cycles. A run up for 6 years and a pause or decline on the 7th year. Consider the historical dip cycle, 1980, 1987, 1994, 2001, 2008, 2015? Today, the market has fallen nearly 800 points in the last 5 days alone nearly wiping out any gains for the year. While falling stocks prices may hurt your retirement, they make people aware of their financial exposure and encourage planning for long term care.

More expensive and complex product:

When the average LTCI buyer, age 56, purchases a policy today, they will own that policy for nearly 25 years before they are likely to use it. Insurance companies are now seeing a greater volume of claims and have a better understanding of who is a good applicant and who is not. As the product has increased in price and complexity over the years, it is more important than ever to work with someone who specializes in long term care insurance. In the past, just about any insurance agent could sell long term care insurance; and they did. The underwriting was easy and the price was low. Today the underwriting includes paramed exam, memory tests, and reviewing medical records. Working with a specialist who really understands what each insurance carrier will accept for medical conditions is critical to getting a policy. We say, “You may pay for the insurance with your money, but you BUY the coverage with your health.” If you apply with a carrier and are denied coverage it could make you unable to get a policy from another carrier as many will not consider an applicant that was previously declined by a competitor.

Our Consumer Specialists average 5+ years experience in Long Term Care planning and each help hundreds of consumers each year understand, apply and buy long term care insurance.

At LTC Consumer we believe that LTCI is still the most economical way to protect against the unknown cost a chronic illness could bring. As state and federal budgets continue to be squeezed, as baby boomers age, and as ObamaCare is further implemented it will pass more expense to consumers and further the need for long term care insurance.

Having a plan for long term care is more important than ever before. The policies sold today are very comprehensive and many are surprised at how affordable they are. While the sales have been down the last few years, the reason is more about how it is being sold and the incredible rise in the stock market than the need going away. As the product has gotten more expensive and the underwriting more complex it is critical to work with a specialist who really understands this marketplace and to do your homework ahead of time.