June 28, 2012

Two Things to Look for In a Long Term Care insurance provider.

 Long Term Care (LTC) insurance can be a good idea for someone in their 50s or 60's.   This kind of insurance is not as common and may be a little harder to shop for than something like auto or home insurance.   LTC is also an evolving product that insurance companies are still working to figure out how to handle well.   Here are a couple things I'd recommend looking for when shopping for LTC coverage.   

Stick to Big Diversified companies

A.M. Best the company that rates insurance companies published a paper discussing the struggles seen in the LTC insurance industry.   One thing they highlight is how the smaller companies that just specialize in LTC policies have had more problems than larger diversified providers.  Those smaller companies are not as established and diversified and all their eggs may be in the LTC business.      The A.M. Best article has this graph showing the ratings of the smaller companies versus the larger ones :

source : A.M. Best

This is not a good trend for the smaller, specialty LTC insurers.  The rating of the company is a estimate of their financial strength.  You really don't want to be buying insurance from a company that is on shaky financial footing.  You can see the red line representing the small companies is steadily going down and is now in the C's which means they are 'marginal' or 'weak' financially.
For this reason : I would avoid smaller insurance companies or those who specialize in LTC products only.

Look for A Highly Rated Company

Insurance companies are rated by A.M. Best, Moody's, Standard & Poors and Fitch.   You should look for an insurer who has a high rating in the A's.    A rating in the A's will be Excellent, Strong or Good level.   The different rating agencies have different grading systems.   AM Best explains the ratings here.

The American Association for Long Term Care Insurance has a list of highly rated LTC providers.

For 2012 the leading LTC insurers are : 

Genworth = A (excellent)
John Hancock = A+ (superior)
Life Secure Insurance = A- (parent company )
Massachusets Mutual = A++ ( superior)

MedAmerica = B++ (very good)

Mutual of Omaha =  A+ (superior)
Prudential Insurance = A+ (superior)
Transamerica Life = A+ (superior)

Looking at that list I might narrow it down to just the A+ companies.   The B++ one is a few notches below the others in its rating.   The A- Lifesecure is based on its parent company and I can't find out what that company is.  From their website it seems Lifescure specializes in LTC too.   The A rating for Genworth is OK.  I might check them for a quote, but I'd try the A+ companies first.

Ratings change over time so I would make sure to double check the current rating on any insurance company before I investigate the options.

Of course there are other factors you need to look at when shopping for this kind of insurance.   The coverage and price are major factors in the purchase decision.   However sticking to larger diversified insurance companies with solid ratings will give you a safer product.

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