John Hancock Life Insurance Company announced today they are ending sales of long-term care (LTC) individual policies. This is not surprising news. I stopped recommending stand alone LTC plans years ago. The fundamental flaw of individual LTC policies from the consumer’s point of view is that they are subject to future rate increases. Carriers sold benefit rich LTC plans with inflation protection, in their heyday top end plans offered unlimited an benefit period with annual 5% compound benefit increases, but in recent years policy owners have been hit with double digit rate increases and the potential of more in the future. Individuals in their retirement years can ill afford those premium increases. Besides traditional LTC plans are use it or lose it.
The movement is to hybrid life insurance LTC plans. Please refer to my comprehensive guide: Life Insurance that pays for Long Term Care: the hybrids. Long-term care or chronic illness benefits are included with life insurance, a living benefit as well as a death benefit. There are some finer print provisions to watch out for, LTC insurance vs. chronic illness benefit, permanent vs. temporary conditions, but in all it’s high quality coverage. The policy owner receives a benefit one way or another, either accelerating out for LTC or as a death benefit, at a reasonably fixed cost.