Long Term Care Insurance Statistics: October 2014 Update
October 2014 Summary: Women account for 2/3 of LTC Claims, and premiums are higher for women in many cases, but not always.
Claims by Demographic
- Ages range from the youngest person to claim, at age 27, to the oldest person (so far) to claim, at the ripe old age of 103!
- The longest claim so far was 18.7 years, and over $1,200,000 in benefits. This particular client, according to legend, paid four years premiums before making the claim.
Long Term Care is a Women’s Issue
Consider that 71% of claims dollars are paid to female claimants. Anyone who’s ever been to visit in a nursing home would think the proportion is higher than that, since women make up around 80% or more of all nursing home residents. Consider, though, that about 75% of claims start at home, when a man may still be alive and partially cared for by his wife and family.
In 2013, the top Long Term Care Insurance companies introduced Gender-Based pricing (Reuters), targeting higher premiums to women, and in particular single women (CNBC), to help adjust to this large disparity in risk. As of this writing, there are still several companies offering the same rates to men and women, so it may be a good time to inquire while that door is still open.
Daily Statistics: Claims are Being Paid
Most of us have a natural apprehension of insurance companies, but “blue chip” Long Term Care insurers are trustworthy in delivering on their promises. The largest provider of Long Term Care Insurance pays $4,300,000 in benefits every business day as of April 2012.
The LTC insurance market is made up of about 25 companies that currently sell or sold policies in the past. Estimates of total daily payout range from $9-$15 million when considering the entire market. The positive effect that savings has on existing policyholders is substantial, considering the extremely high and ever increasing cost of care, which is part of the reason that sales for Long Term Care Insurance are actually increasing at many of the top insurance companies.
A Dichotomy: Short vs Long Claims Phenomenon
There’s a popular saying in the LTC Insurance industry: “You either have a 100% chance of needing care, or a 0% chance. And you don’t know until the time comes.” While there is truth in the statement, it ignores rational thought and statistical analysis. What cannot be ignored, however, is the division of claims into two distinct groups.
- Claims that last a year or less. [Manageable]
- Claims that last over a year. [Potentially Catastrophic]
If you make it past a year, hang on tight.
Once a claim has lasted for at least a year, it falls into a different category, and becomes potentially catastrophic. Claimants that break the one-year threshold then experience an average of 3.9 years of care. Longer claims are accounted for by things such as dementia or Alzheimer’s (nearly 50% of total claims) that tend to go on. Women are more likely to make these longer claims, yet another reason for the gender-based pricing.
An Alarming Trend Revealed: “Long Tail” Claims are Getting Longer
Statistics collected in the late 90′s indicated that about 95% of claims were in the universe of five years or less, and the conventional wisdom that this is true is widespread. However, for the 2012 update, we found that the percentage of claims lasting beyond 5 years had tripled to approximately 15%. Several insurance companies quit offering Unlimited Benefit plans over the last few years for obvious reasons. In 2012, every single insurance company that offered “Unlimited” long term care coverage pulled that from the market. There are still companies offering up to ten years of benefit payments, so if you’re concerned about longer claims, mention that to your advisor.
- Benefit Window: Average: 3.57 years purchased, with a median of 3 years, or 1,095 days.
- Benefit Amount: Average of $155.12/day benefit, with a median of $150/day.
- Monthly benefits were converted into their daily equivalent for this study.
- Average Premium: $3,152 (This would be a combined total for married couples.)
When Is the Right Time to Buy Long Term Care Insurance?
The average client in this study was age 53. Learn more about your ideal age to buy (or shop for) Long Term Care Insurance.
Compare Your Actual Costs
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