Alternatives to long-term care insurance

Life insurance

Life insurance, either alone or in combination with an LTC policy, can be effective in some estate planning situations. The life policy essentially protects the estate against the future costs for long-term care.

"People who have estates in the $1 million to $4 million range will have enough money to pay for long-term care if they have the need, but it could eat up their estate," says Jeff Derdiger, LTC specialist with Prescott Pailet Benefits. "So instead of buying long-term care, they buy life insurance."

"The life insurance is used to replace an estate that has been eaten up by LTC need. That way, they can draw down on the interest and principal from their investments for long-term care if they need it, with a guarantee to leave their children something through the life policy."

Pros: Protects the value of your estate against LTC risk. No LTC underwriting concerns. You also could supplement the life policy with a lesser-amount LTC policy to insure part of the risk.

Cons: It's only a sound strategy for those who won't need LTC insurance.

Possible future products

Allowing that insurers are still reeling from the current economic environment, what options might appear on the horizon to rescue the nonmillionaires among us?

Preston says he'd like to see a long-term disability plan that automatically reverts to LTC coverage at age 65 or 67, with a guaranteed issue provision for your spouse at age 65. Both types of coverage are needed but struggling today.

"That would give people the peace of mind by transitioning that disability premium over to a long-term care contract that they don't have to worry about qualifying for down the road," he says. "I think that would be a fantastic seller."

Derdiger dreams of a term life version of long-term care insurance in which the premium rates are guaranteed for the term of the policy.

"It would eliminate the concern of a future rate increase and how they're going to be able to afford it when they're no longer working," he says. "They don't mind paying a higher premium during their earning years if they can make sure that it's not going to be a problem for them when they're retired or their income drops."

But Blazzard isn't optimistic that long-term care insurance per se will be viable, much less affordable, anytime soon.

"We need it desperately. The problem is, in today's economic climate, I don't see how anybody can sell it at a profit, because you either have to crank up the loads so high that nobody can afford it, or you've got to crank down the benefits to where there is no point in having it. It's a bit of a conundrum that I don't know how to solve, and I don't think any actuaries do either."

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