Does Long Term Care Insurance Pay?

Jesse Slome, Executive Director of the American Association for Long Term Care Insurance discusses the actual chances of using benefits from a LTC Insurance policy. He pulls together research and information from actuaries so a consumer understands how likely they can receive money from a policy

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Video Transcript

You're watching this video because you're asking a very good question, "Does long-term care insurance really pay?" Let me try to answer that for you.

My name is Jesse Slome. Since 1998, I've been Executive Director of the American Association for Long-term Care Insurance. Our role is to advocate and educate. We don't sell insurance. Our support comes from insurance professionals who market this product, so not the insurance companies. Every year we conduct regular research, and that's what I'm going to share with you on this video.

You may read lots of statistics on the internet, and in articles and frankly, many of them I find somewhat misleading. The real question that you want to know the answer to is, "If I buy long-term care insurance, what's my lifetime chance of actually using the policy benefits?" We've had actuaries really do this study. If you buy the coverage at issue age 60, you're going to have a deductible. 94, 95% of the people who buy these policies, buy it with a 90-day EP or a 90-day deductible. If that's you, you actually have a little over one in three chance of using the policy. If you were to buy it with a zero-day deductible, you'd actually have a one in two chance of using the policy. If you're at age 70, the likelihood of using the coverage in your future years is just slightly higher.

If you think about it, a one in three chance of actually using the benefits is quite high. You probably have car insurance, maybe you've gotten into an accident, but hopefully not too recently. If you have homeowners insurance, hopefully you've never had a house fire, but with here, your chances are pretty significant that you're going to use it.

The second question that we're asked is, "So, how much do people really get paid?" What we did is we actually surveyed the companies, and we asked them "What's the largest single year amount that they've paid?" This is an amount that they've paid to a single individual in the course of, in this particular case, 2014, and as you can see, it's varied from little under $100,000 for one individual, to almost $350,000. That's a single, one year payment.

This is probably the most important slide for you, because if you're considering long-term care insurance, you don't buy this today and go on claim. This is something that you buy with the anticipation that you're going to need it in future years. The insurance companies understand that, prepare for that, and charge you for it. But in 2014, the longterm care insurance industry actually paid out $7.8 billion in cumulative claims to between 250 and 270,000 individuals. By 2032, the industry based on the number of people that currently owned policies, not even consisting of future purchasers, is expecting to pay out $34 billion in claims.

This is not like storm insurance where some years there are big storms and other years there aren't. Because the insurance industry can actually project how policyholders are aging and when they're going to need claims, this is a real number of what the industry will pay out, going forward. So does longterm care insurance pay? Well, hopefully this brief presentation has shared some real facts with you, that shows you that yes, it does pay for many, many people every day, every year. Will it pay for you? Well, the fact of the matter is I call longterm care insurance the reverse lottery. With a lottery, you want to put in a dollar and you want to win a million. With long-term care, this isn't something that any of us ever hope we're going to need in our future. But if you have the insurance, I promise you two things. You and your family will be very glad that you did something like this.

Now, if you have questions or you would like no obligation costs or more information, you can call the association offices. We're only too glad to answer your questions, and if you're not working with a long-term care specialist, we'll be only too glad to connect you with one who is a member of our organization.

If you have more interest in the topic, let me recommend three pages on the association's website that I think are worth visiting. These are the shortcuts to get to the pages. On will take you to a page where we have different guides that I've written for Kiplinger's Personal Finance magazine. There's no sign-in information to access or read the guides. You just click on them and they open up on forward. On /ideas, we have posted real examples of real people, and how working with a specialist has gotten them better coverage. Sometimes they might've been declined with one insurer, but how the specialist knew how to get them covered with a different company, or how this specialist got them better coverage for less money. To watch more videos on the topic, go to /videos.

Thanks again for watching. Again, if you have questions, please feel free to call the association offices at (818) 597-3227 or for more information, visit our website. Thanks.

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