The Performance of Long-Term Care Insurance

The relatively slight chance that an elder will need three or more years of nursing facility care means that the insurance industry has not had to pay out on its policies to nearly the extent that it suggested when they were sold. And when the policies’ conditions, exclusions, and benefit limits are figured in, the performance of these policies—at least in the decade of the 1990s, for which complete statistics are available—has been quite poor.

• About 50% of all policies lapsed before any benefits were paid; people were unable or unwilling to continue paying their premiums.

• Of those people who bought the insurance and later entered a nursing facility, about half never collected a dollar from their LTC policies.

• No benefits were ever paid to the many who bought nursing facility coverage but instead received home care or entered a residential facility, not covered by the insurance.

• When benefits were paid, they were far below the actual cost of care.

• For many of the longest-term residents, benefits were used up before the nursing facility stay ended.

In all of these situations, the LTC insurance failed to live up to its promise to help people avoid using up their savings, or relying on Medicaid, to pay for long-term care. In other words, it was a lousy investment.