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Keep an eye on your long-term care insurance policies
The warning bells are ringing for individuals who have purchased long-term care insurance coverage.
The Wall Street Journal has reported that Conseco Inc., a major insurer, has transferred its long-term care policies to a state-supervised trust. "The policies were a drag on the company's earnings because they were underpriced and required continuing capital infusions to meet the long-term needs of policyholders," the Journal article stated.
This affects more than 140,000 owners of Conseco Senior Health Insurance Co. policies, who may face higher rates and reduced benefits.
In a written statement, Pennsylvania Insurance Commissioner Joel Ario defended the transfer stating that without the transfer "The likely result would have been either substantial rate increases or insolvency."
One Conseco policyholder, a 73-year-old Florida woman, is worried that the Conseco long-term care policies that she and her husband paid more than $45,000 in premiums for over 20 years won't pay now when her husband may need nursing care.
Long-term care policies are expensive but their selling point is that care costs in old age may be far more financially draining on individuals and their families. In the early days of long-term care policy sales, some insurance agents used the fear of skyrocketing nursing home costs to make sales when, in fact, many seniors never need nursing home care.
If you can afford the premiums, the policies could be a good investment but -- in the wake of Conseco's recent moves -- proceed with caution. If you currently own a policy - keep an eye on your insurance company's financial health.
According to the Journal article, persons shopping for long-term care coverage "should take particular care in picking out a financially stable insurer by examining its financial statements and ratings, and checking into its record of premium increases." Consult a trusted financial adviser. Don't rely on someone whose sole purpose is to to sell you a policy.
The National Association of Insurance Commissioners offers some tips for consumers interested in purchasing long-term care insurance.