180,000 Americans Receive Long-Term Care Insurance Benefits
The Long Term Care industry pays out $3.5B in claim payments. The new LTC insurance claims data is designed to help consumers to plan ahead.
Some 180,000 Americans with long-term care insurance policies were paid benefits in 2007, according to a just-conducted study released by the American Association for Long-Term Care Insurance (www.AALTCI.org). This is the first time the total number of individuals on claim was gathered.
"The long-term care insurance industry paid out $3.5 billion in benefits to individuals last year," said Jesse Slome, Executive Director of the American Association for Long-Term Care Insurance. The AALTCI compiled data from over 60 long-term care insurers who represent 98 percent of all policies currently in force.
"The risk of needing long-term care is higher than the risk of a serious car accident or house fire, but few people are aware of how many individuals and families already benefit from having purchased long-term care insurance," Slome notes. "Some 400,000 new policies were issued last year alone. As more individuals become aware of, and understand the importance of, planning for long-term care needs, the number of individuals and families deriving benefit from this coverage will only increase.”
The Association's study of claims paid to individuals revealed meaningful information for those considering a long-term care plan. According to the study, 43.0 percent of claims paid in 2007 were attributed to home care. Nearly one-third (32.9%) of claims were for assisted living and 24.1 percent covered nursing home care.
"Most people associate long-term care insurance with nursing home care, but quite the opposite is true," explains Slome. "The vast majority of benefits paid today cover care at home or in an assisted living community." Over 97 percent of long-term care insurance policies sold provide some form of home care benefit (86% did in 2000 and 67% in 1995).
The Association study found that most individuals receiving benefits from their long-term care insurance policies are older. Nearly a third (32.3%) of new claims in 2007 began for individuals between 70 and 79, according to the Association findings. Over half (55.2%) began for those age 80 or over but 11.5 percent were for those between 50 and 69. The youngest individual on claim (a group insured) was 23.
Long-Term Care Planning Should Be Part of Retirement Planning
"Long-term care planning needs to be part of retirement planning. Because most individuals, unless guaranteed through a group, will need to health-qualify for coverage it’s important to start planning when individuals are in their 50s,” Slome adds. In 2007, the average purchase age for individual coverage was 58, a decline from the average purchase age of 67 as recently as the year 2000. An individual is far more likely to qualify for significant good health discounts offered by leading insurers when they are in their 50s than if they wait to purchase coverage until they’re in their 60s.
The five most common reasons for a long-term care insurance claim, according to the Association, are Alzheimer's Disease, stroke, arthritis, circulatory issues or injury. "One in eight persons age 65 and over has Alzheimer's," Slome says. "The number of new cases is expected to increase to 450,000 a year by 2010 and to 615,000 new cases a year by 2030. It’s time for individuals to start planning for care should they need it in the future."
Women comprise two-thirds of individuals on (long-term care insurance) claim and receive just over two-thirds of all claim dollars. "Women, especially those who are divorced, widowed or living alone, need to plan for the risk," Slome advises. "More than 70 percent of nursing home residents are women and almost two-thirds of formal (paid) home care users and informal (unpaid) care recipients are women."
Claim payments from insurers ranged in size, according to the Association. "Some of the largest open claims (those still being paid) ranged from more than $500,000 to just over $1 million with the claimants having received benefits for between 7 and 13 years," Slome reports. "Most people will be on claim for between one and three years but there are some really catastrophic situations that last far longer."
According to the Association, in 2007 a fourth (25%) of all individuals purchased a three-year plan of coverage (40% buy 4-5 years; 11% buy 6-10 years; and 18% buy unlimited protection).
The American Association for Long-Term Care Insurance is the professional organization serving both insurance and financial professionals as well as educating consumers nationwide. The Association's Website (www.AALTCI.org) maintains a simple online "look-up" listing long-term care insurance professionals in each Zip Code. The Association established Long-Term Care Awareness Month (in 2001).
Long-Term Care Insurance: 2008 Claims Data Summary
Source of Information: American Association for Long-Term Care Insurance
Number of Individuals Receiving Claim Benefits (in 2007): 180,000
Total Value of All Claims Paid (in 2007) $3.5 Billion
Percentage of LTC Insurance Claims Paid For (Individual Policies; 2007)
Home Care 43.0%
Assisted Living 32.9%
Nursing Home 24.1%
Claimant Age For New Claims Opened in 2007
Under age 50 0.5%
Age 50 - 59 2.5%
Age 60 - 69 9.5%
Age 70 - 79 32.3%
Age 80+ 55.2%
Youngest Claimant: Age 23 (a group LTCI policy). Another leading carrier has 87 claimants who are younger than 50
Top Causes of LTC Insurance Claim
Source: 2008 LTCi Sourcebook, LTC Insurance Experience Report prepared by the Society of Actuaries