We are asked this question often and for good reason. There are major insurance carriers like MetLife, Prudential, and others that sold Long Term Care Insurance (LTCI) at one point, but have since decided to stop. If you find yourself in this situation, don’t worry, it often is not as bad as it sounds. In this article we will cover the most common questions related to carriers leaving the LTCI market for whatever reason, even if they go bankrupt.
What happens when an insurance carrier stops selling Long Term Care Insurance?
This is by far the most common issue and is often referred to as “leaving the market” or “suspending sales.” If you bought a policy from a company that is no longer selling new insurance policies, you still have coverage and that insurance company is still required to meet its obligations of your policy. LTCI is a Guaranteed Renewable contract. That means the insurance company can’t cancel and must renew, unless the benefits listed in the policy have been completely used or the premiums haven’t been paid. The insurance carrier can only change the price of the policy with state approval as long as it is inforce and you are paying your premium. Insurance companies may sell or stop selling different products as they respond to marketplace changes, but just because they no longer sell a certain product, doesn’t mean they aren’t covering those who purchased it.
What happens to my policy if the insurance company goes bankrupt?
Just like there is Federal Deposit Insurance Corporation (FDIC) insurance to protect you if your bank goes bankrupt, there is an Insurance Guaranty Pool to protect you if the insurance company goes bankrupt. The Insurance Guaranty Pool is a fund managed by each state that insurance companies pay into each year. If an insurance company goes bankrupt, the first recourse is to see if there is another insurance company that will buy the assets of the bankrupt company, but therefore assuming the liabilities and the contracts they sold must still be honored. If no buyer comes forward, then the Insurance Guaranty Pool kicks in to cover the liabilities of the policy, up to a certain limit. For example, in Oregon the Insurance Guaranty Pool will cover LTCI claims up to $300,000. Your state may have a different limit, a simple internet search will help you find it.
What happens to my policy if the insurance company I bought from is purchased?
LTCI is a Guaranteed Renewable contract so the acquiring company is still obligated to pay your benefits based upon the terms of the contract you originally bought.
If the insurance company no longer sells Long Term Care Insurance, will they raise my rates in hopes I drop the coverage?
No. All rate increases for LTCI are regulated and approved by each state’s insurance commissioner. In order for any rate increase to be approved, the insurance company must prove that a rate increase is justified and that they are incurring unexpected and significant losses. Only the rate increase that the insurance regulator deems reasonable will be approved. A rate increase is the last resort for an insurance company as it is a long, expensive process that rarely gives them all they are looking for. State regulators have cracked down on approving rate increases, especially on carriers that are no longer selling LTCI policies. Meanwhile, policies sold in the past 5 years are far more accurately priced. While rate increases can still happen, the likelihood is much less than policies that were sold 10+ years ago.
If you have a policy from a company that is no longer selling LTCI, do not worry, the coverage is still as good today as the day you bought it. There are other measures in place to make sure it is still there when you need it.