It’s true that men have always paid more for life insurance then women based simply on the fact that women statistically live longer. A similar pricing structure is about to come to the long term care insurance industry, only in favor of men this time around, and for the exact same reason.
Women Live Longer and Will Pay More
On average, women outlive men by five to seven years. The older we become the greater the chance that we will one day be in need of Long Term Care (LTC). Statistics show that currently about 70% of the residents who live in a nursing home are women. Women represent almost 80% of all individuals living in assisted living facilities and two-thirds of those receive home care. According to one LTC insurance executive, $2 out of every $3 paid in long-term care claims are for women.
The long-term care insurance industry was started in the 1980s and many companies rushed to get into what they thought would be a lucrative market. However, based on untested underwriting practices, a low interest rate environment and greater utilization than had been expected, many companies have seen much higher claims than they anticipated.
Many companies, including Prudential, MetLife, Allianz and others, have stopped selling new long-term care policies altogether and those with existing coverage are experiencing hikes in their premiums by as much as 40%.
Genworth is the nation’s largest long-term care insurance provider and is the most experienced, as well. They are, however, making some changes. In order to better underwrite future policies (i.e. maximize their profits), Genworth will soon institute “enhanced underwriting.”
Qualifying for LTC Will Be More Difficult
Leesa Fons, an Insurance broker in the Sacramento area who has been involved with LTC Insurance for 20 years explains that “The new enhanced underwriting means that new LTC insurance applicants will be subject to a full paramedic exam which includes blood pressure readings and lab work. This is similar to the exam used to screen life insurance applicants. A number of health conditions will be tested for; some of these include diabetes, heart disease, and hepatitis. This will make it more difficult to qualify for coverage.”
“Since dementia and mental impairment are a leading cause of Long Term Care claims, insurers will soon require an in-person interview where the examiner will have an opportunity to observe firsthand the proposed insured’s mental acuity and residential surroundings,” Fons said.
Barbara Hanson, an insurance broker in Santa Cruz, California, who has specialized in long-term care since 1995 recently said, “People who are waiting to buy a long-term care policy may be less able to pass underwriting as it is becoming more stringent. I have a client who was able to get covered a year ago, but was declined for an improved policy by the same carrier this year due to health underwriting changes the carrier enacted last spring. When one carrier moves in this direction, others will follow.”
Another change that will impact women is a so-called “gender pricing strategy,” which will raise rates for single women by as much as 40%.
Consider LTC Coverage Now
For individuals considering long term care insurance Fons recommends that they “make it a priority to discuss the issue with your financial advisor in the near future. If obtaining a policy is appropriate for you; apply before April 1st, 2013.”
Hanson responded, “The younger you are when you apply, the lower the lifetime cost. With the upcoming changes in underwriting and rates, it is paramount to investigate the option now rather than later.”
Hanson went on to say, “To prepare for old age without the protection of LTC insurance, women need to have access to a substantial nest egg or high monthly income. A reverse mortgage may be helpful for those with equity in their home when the nest egg is gone. However this may not be a good idea for others. Relying on family for 24/7 care is usually not possible, or can be seriously draining on those we love.” The Medicaid system is still available to provide a safety net for those with little assets or income.
Fons pointed out “A major concern for women is not only outliving their wealth… but outliving their health. There isn’t a more significant drain on assets than having to pay for the cost of an assisted living facility or professional care givers.”
No one wants to be dependent on others for their care in their later years, but the longer we live, the greater the chance of having decreased physical or mental abilities that will require assistance. Long-term care insurance isn’t for everyone but if ever you think you might consider it, do it now rather than later!