What Is the Value of Long-Term Care Insurance?

Unlike life insurance, the insurance industry does not have many decades of experience with long-term care (LTC) insurance coverage. There have been well-founded complaints about LTC insurance primarily based on policies written prior to the mid-1990s, when LTC insurance coverage was in its infancy.

Insurers have admitted the weaknesses in the design of early policies and taken steps to correct them. However, some of these problems have persisted, and the consumer is urged to be wary of the products offered. Due diligence is the watchword.

Long-term care policies sold today are quite different from those sold ten years ago. Commentators on LTC insurance sometimes overlook that point. It is worth noting that the federal and some state governments are actively promoting LTC insurance as a planning option among their own employees.

Despite these significant improvements, a long-term care policy is still insurance. Like virtually all types of insurance, LTC policies have limitations on coverage and may not totally cover your costs if a claim is made. Furthermore, as with homeowners,' auto, or other insurance policies, it is quite possible to pay premiums for years and never make a claim.

When another year passes without a devastating house fire or car wreck, we don't regret having "wasted" money on insurance. Instead, we recognize that insuring these risks is the responsible thing to do and look forward to twelve more months of protection from financial ruin if calamity strikes. But how good will today's LTC policies be in the future?

Some have questioned the usefulness several decades from now of long-term care insurance coverage written today. Medical and long-term care facilities and services have undergone big change over the years. So has their cost, as well as the roles of government and private insurance in meeting our needs. This will certainly continue, even if not at the same pace.

But consider the likelihood of changes that could make today's LTC policy less useful or unnecessary. For example, if LTC services of the highest quality become a universally available government benefit, a policy purchased today will probably end up being redundant and a waste of money.

Alternatively, if LTC coverage were to become integrated into a yet-to-be conceived form of comprehensive, affordable health insurance, today's stand-alone LTC policy could possibly become less valuable.

Future uncertainty cannot be removed from the insurance purchasing decision—or any other financial planning choice. Each consumer must weigh how much influence to give possibilities like these. But there is presently nothing to suggest either one is remotely likely.

Will the changing nature of LTC facilities and services themselves make today's coverage ineffective? It is difficult to envision a scenario in which this could happen. That's simply because the policy benefit triggers—assistance with the ADLs or a severe mental impairment that requires supervision—are human conditions not subject to change. It is hard to imagine how the delivery of personal care—assisting a frail person to eat or bathe, for example—could become much different.

As for the development of LTC settings different from today's adult daycare centers, continuing care communities, assisted living facilities, and nursing homes, it appears that current policy language would cover most such places as well. The existing options vary widely and are subject to multiple broad definitions already. Again, it is hard to conceive of a future LTC residential mode that could not be included under one of these facility categories.

It is also important that a certification of the insured person's condition and a plan of care written by a licensed healthcare practitioner be required by most policies for the payment of benefits. The certification and plan of care are the insurer's confirmation that benefits are paid only under appropriate circumstances. For this reason, policies make eligibility for benefits far more dependent on the need and the type of long-term care to be provided than on where it is given, as long as it is not in a typical hospital bed.

Finally, many policies now have an "alternate care plan" feature as a basic benefit. This allows payments for facilities and services that are not specifically defined or otherwise covered under the policy. The insurer will consider such payments if the alternate care is part of a cost-effective, written plan that meets the policyholder's needs.

For example, personal service robots might move from science-fiction novels to the living room in the not-too-distant future. Perhaps they will eventually substitute for human caregivers at lower cost, even if only to monitor a sleeping person overnight, with a family member on call.

Although the alternate plan of care feature does not formally commit the insurance company to anything specific in advance, it gives the insured additional leverage in requesting coverage for a new LTC service that might evolve. If a new idea or technology allowed more people to remain at home longer, it would surely be an "alternate" plan that both the insurance company and most policyholders would be happy with.

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