Long-term Care Insurance Choices Shrink as Prudential Stops Sales

Arthur Stein Financial, LLC |

Prudential Financial Inc. recently announced it will stop selling individual long-term care insurance policies.

Prudential will continue to sell group policies and honor its commitments to existing policyholders.

Other companies that previously stopped selling long-term care insurance include Allianz, MetLife and UNUM. At least 50 companies continue to sell new policies.

Low interest rates are a key reason for the Prudential decision. Insurance companies typically invest premiums in bonds and similar investments in order to have funds available in the future to pay benefits. Lower than expected interest rates reduce expected profitability. Long-term care policies are especially sensitive to lower interest rates because the average time between selling a policy and paying benefits is longer than for most other types of insurance.

Fortunately for existing policyholders, individual long-term care insurance policies represent a binding legal contract between the insurance company and the insured. The company can never cancel a contract for any reason other than non-payment of premiums or exhaustion of benefits.

So Prudential can stop selling new policies but it must honor its commitments to existing policyholders. Prudential affirmed its commitment to honor these obligations.

I have sold over a thousand long-term care insurance policies over the last 20 years. In my experience, companies do a good job when it comes time to pay benefits. Industry studies indicate the same thing. Even the companies that no longer sell policies are not bulking when it comes time to pay.

Whether to purchase long-term care insurance is one of the most important pre-retirement decisions. If you need help with this decision, you can go to my LTC website www.LTCguide.com or contact me directly.