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Study Examines Duration Of Long Term Care Insurance Claims

Armen Hareyan's picture

As Americans live longer lives, the likelihood of needing long-term care significantly increases. As a result, most financial experts agree that undertaking some long-term care planning, preferably prior to retirement is a smart move.

According to the American Association for Long Term Care Insurance, some 8.25 million Americans currently own long term care insurance protection, purchased either on an individual basis or through a plan offered by their employer. "Several hundred thousand new policies are issued each year," explains Jesse Slome, executive director of the industry trade organization. "One of the most commonly asked questions is how much coverage to buy."

A study undertaken by the organization helps shed some light on this topic. "There are important things to keep in mind," Slome notes. "Averages can be helpful but they have little to do with an individual's likelihood of needing long-term care or of projecting how long care will be needed." Many statistics often reported are dated or provide irrelevant information. The Association's study was undertaken by Milliman, a leading independent actuarial firm.

"The likelihood of needing long-term care which can be as high as one-in-two individuals after age 65, is not the same as your likelihood of using your long term care insurance," Slome notes. Last year, the long term care insurance industry paid out some $8.5 billion in claim benefits to over 180,000 policyholders.

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The study which looked at over 100,000 claimants revealed some important findings. "While purchasers select a benefit period, that's really a misnomer because policies are typically make available a pool of money for benefits," Slome explains. "As a result, 1-in-10 three-year policies actually paid benefits beyond the 36-month time period. People were still receiving benefits from their policies for four and even five years."

Association studies show that about one-third of buyers opt for shorter duration policies. Some 30 percent of individual long term care insurance policies sold in 2008 were for three years. "Policies that provide coverage for longer periods of time cost more," Slome explains. "And, while there are certainly long-term care claims that last for many years, we wanted to see if shorter term policies were sufficient for many people."

The study found that for the three-year benefit period, only eight out of 100 claimants exhausted their pool of money. "So, for 92 percent of those option for this more affordable plan of protection, the coverage was sufficient," Slome confirms. "Like all financial decisions, this one should be based on each person's personal situation and ability to accept financial risk."

To learn more about long-term care planning or to find local long term care insurance professionals in your area, visit the American Association for Long Term Care Insurance's website: aaltci.org. The Association's website features the nation's most comprehensive Consumer Information Center dedicated exclusively to long-term care.

Written by Jesse Slome