Insurance
Group Long-Term Care Insurance Is Not All It Promises
When many consumers first start shopping for long-term care (LTC) insurance, they are often surprised by the high cost of premiums of most policies. It is understandable then that many consumers jump at the chance to sign up for group LTC policies, which are often offered through employers. However, there is a very serious pitfall to many group policies that generally make them bad choices for most consumers.
While group LTC insurance may seem like a better value to the consumer, over the long term it will usually not be the best choice. The huge risk that the consumer most often unknowingly takes on with a group policy is the risk of cancellation. An LTC policy obtained through group coverage is most often not guaranteed renewable. Without such a guarantee the insurance company (or the employer) can drop coverage at any time. In such a situation the consumer would either be forced to go with a new group policy, if offered, or be left with no coverage. A worst-case scenario for a consumer would be to have a policy dropped at an age where an individual policy would be cost-prohibitive or unavailable due to health problems.
When evaluating a policy, it is important to understand that "portable" is not the same as guaranteed renewable. The term portable when describing an LTC policy means that you can take the policy with you should you change employment or leave the company. While a nice feature, portability does not guarantee renewability of the policy. A guaranteed renewable policy cannot be cancelled by the insurance company as long as you pay the premiums. (Note, however, that there is no guarantee that premiums will not increase.)
There are other drawbacks to group LTC policies as well. Group policies do not lend themselves easily to customization for your particular situation. Often cookie-cutter in approach, chances are that you may not end up with a policy that satisfies all of your unique needs. Additionally, contrary to other types of group policies, group LTC insurance may actually be more expensive than an individual policy, if you are in good overall health and relatively young.
If you are approached with a group LTC policy, make sure you do diligent research before accepting the offer. Be aware that group LTC insurance is not offered solely through employers. Other groups and associations, such as AARP, offer such policies.
Before committing to any LTC policy, group or individual, it is important to be informed of all of your options and to explore what type of policy, if any, is right for you. At PFA, we've partnered with a leading, locally-based LTC professional in order to provide our clients with the best service possible when it comes to LTC planning. If you have not yet addressed the question of how you would cover a need for long-term care, give us a call to discuss whether a meeting on that topic is appropriate.