John Hancock pulls out of the long-term care insurance market

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John Hancock pulls out of the long-term care insurance market
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John Hancock has announced it’s getting out of the business of selling individual long-term care (LTC) insurance policies effective December 1, 2016, according to the Boston Globe.

The insurer—which is a major underwriter of more than 1.2 million policies—already stopped selling new group policies in 2010.

If you already have an existing policy through John Hancock it will remain in effect despite their newly announced exit from the individual market.

Read more: Your C.L.U.E. report: What it is and how to check it for free!

Premium hikes and longer life spans to blame

Demand for LTC insurance—which pays for care in a nursing home, assisted living facility or your own home as you age —has dried up as insurers piled on big premium hikes in the wake of the Great Recession and people requiring more medical care because of longer life spans.

How big of a premium hike are we talking about here? John Hancock pushed through an 83% average rate increase earlier this year and has asked state insurance regulators for further increases. (Insurance is regulated at the state level, not the federal level.)

So when you couple those kind of price hikes with a smaller field of insurers who want to sell these policies, you have a recipe for disaster. There’s a big bull’s-eye on your wallet if you’re shopping for an LTC policy!

Here’s what you do about it…

Shopping for LTC insurance can be simplified by contacting an independent agent who can shop quotes from a variety of companies for you. The website of the American Association for Long-Term Care Insurance is a good starting point.

When shopping for LTC insurance, look for a five-year benefit with a six-month waiting period upfront before it kicks in. Also, be sure the policy adjusts for inflation so the benefit is not subpar when you need it. An inflation level somewhere maybe as much as 5% a year should do the trick down the road.

Also, and this one is extremely important: You only want to consider buying from insurers that have been rated A++ by A.M. Best. That means they are of the highest financial strength and will likely be there for the long haul. Visit AMBest.com to search ratings. (Free registration is required.)

Will Medicare offer a solution?

The reality is nearly 70% of today’s 65-year-olds will need long-term care at some point, according to the U.S. Department of Health and Human Services.

People too often think they don’t need to buy an LTC policy because they’ll have Medicare. Don’t fall into this trap!

Medicare might pay for you to be in a nursing home while recovering from surgery (short-term acute care), but it won’t pay for you to be there indefinitely.

Here’s what to consider when facing higher premiums

Consider the following before just rolling over and paying an increased premium:

Try lowering your benefits

Some policies will let you pay your current premium in exchange for lower benefits even after a rate hike is in effect. Areas you might consider trimming are inflation protection and the benefit term. But you must balance those considerations against the possibility that you’ll pay more out of pocket if you do wind up needing LTC for a long time.

Shop the market

Though the LTC market has thinned out, it pays to at least look around and see if there’s a cheaper option out there for you. That is, if you think you can pass underwriting.

Swallow the bitter pill

If you won’t be able to put food on the table because of premium increases, you may have to consider letting the policy lapse. If you do that, you’re left with either self-insuring or going the Medicaid route.

Yet note this well when considering the latter option: Even though you may be able to live independently, you could be forced into a nursing home environment prematurely because that’s all Medicaid will cover.

Read more: Clark’s long term care insurance honor roll

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