Your Finance: Do you need long-term-care coverage?

Long-term-care insurance has always been an expensive product,

Long-term-care insurance has always been an expensive product, but now it's getting a lot pricier -- especially for single women who may most need help in old age. (Credit: iStock)

Long-term-care insurance has always been an expensive product, but now it's getting a lot pricier -- especially for single women who may most need help in old age.

Providers are raising rates for old policies and new ones by as much as 60 percent, according to state filings. But the latest development is gender-based pricing.

Genworth, a leader in this field, has started selling plans in 31 states that charge more for women than men. John Hancock is also embracing gender-based pricing, and other insurers are expected to follow suit.

Long-term-care insurance covers the costs associated with assistance in daily living -- when a person needs help dressing, bathing, preparing food and the like. Women live longer than men, on average, and long-term-care insurance companies are experiencing higher payouts for women policyholders than for men.

Under differential pricing, single women can expect to pay 25 percent to 40 percent more for a policy than a single man would for the same policy, according to an analysis of insurance company rate-increase filings performed by Jonathan Wu of ValuePenguin.com, a data-mining website.

For single women, "this provides a unique opportunity for those considering a new LTC policy to buy one before the rate increase goes into effect," Michael Kitces, partner and director of research for Pinnacle Advisory Group in Columbia, Md., recently wrote to his clients.

There is no single directory of state plans and prices to find out if you're too late; if you are in the market for a plan, just start getting quotes. Right now it is a patchwork -- even Genworth doesn't have approval for gender-based rates in 19 states. Not all firms have even filed for gender-based premiums yet.

Nailing down a policy now won't protect you from future rate increases, of course. According to Wu's review, states are facing a slew of requests for increases from LTC insurance companies that may have underestimated risks and mispriced their policies. "They were expecting to pay out 60 cents for every dollar they collected; they are paying out instead $1.50 to $2," Wu said.

Wu predicts the current wave of double-digit rate-increase requests will be followed by another wave of double-digit requests from the same companies.

There are other concerns about long-term-care coverage. Despite the big payouts insurers say they are making, policyholders have had problems collecting their benefits when they need them, especially on old policies from companies that no longer sell new ones. And those insurers still trying to get a handle on proper pricing are getting pickier about whom they sell to.

If you want such a policy, here's what to consider:

Decide whether you really need it. Long-term-care insurance doesn't protect your health so much as it protects your money. Full-time care can run $8,000 or more a month. If you have no money, you will still get care, but you will get it through the Medicaid system. LTC insurance is primarily aimed at people who have enough money that they won't qualify for Medicaid, but not so much that they could afford to pay out of pocket for three to five years of care, and who want to leave money to heirs. Practically speaking, that often comes down to assets worth $150,000 to $500,000.

Decide whether you can afford it. Look at the premiums and think about whether you could pay them if they were double what they are now -- where they are headed, according to Wu. If you would have to drop the policy after a rate increase like that, consider not buying it in the first place.

You can buy reduced-rate coverage at work. But policyholders who leave their jobs and want to keep their coverage in place will often face sharp rate hikes when they do.

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