According to Michael Kitces, the best way to make long term
care insurance affordable is by using long elimination periods.
Long term care policy was originally created to guard
against the “high impact but lower-probability risk of needing long-term care
assistance at an advanced age.” In short, only a small number of people will
require long term care but would face expensive bills.
Due to medical advancements and longer life expectancy, the
number of people who will require long-term care is increasing. According to Mr.
Kitces, it is estimated that 50% of people who are 60 years old will need this
product.
Long term care has turned into a high-probability event with
a big number of lower-cost claims. Therefore, long term care insurance policy
has turned into a product that prepays long term care cost in advance at a high
rate and with little insurance leverage.
The solution to this is simple. Policyholders should
restructure their elimination periods by making it longer so that it can serve
its primary purpose.
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