Long-term care: A question of permanency 

Recently some carriers in the Universal Life with Long-term Care (LTC) market have changed their LTC rider to a Chronic Care rider. This, in itself, is not a problem. With a Chronic Care rider, you can have similar or the same results as you would with a LTC rider. But, what some of these providers have done with their new filing is require a permanency clause to trigger Chronic Care payments. That permanency clause makes a big difference in the kind of protection insureds receive.



Those offering a Chronic Care rider will tell brokers and employers this permanency distinction doesn’t really matter, that it’s not a big deal and people should have Disability insurance to cover these non-permanent LTC Stays. I totally disagree. 

I have been selling some form of LTC rider since the early 90’s when I was at Alexander Hamilton Life. In the mid-90’s Trustmark, bought that block of Universal Life with LTC business from Alexander Hamilton and we still insure and administer that block of business today. In 1995, we released our first Universal Life with LTC product under the Trustmark name and since then have sold hundreds of thousands of policies. We’ve also paid ¾ of a billion (yes billion) dollars in claims - both death benefits and LTC claims. All of this is a lot of words to say that I’ve seen enough life and long-term policies sold to know that coverage for non-permanent LTC is important. Here’s why:

Since we sell these LTC benefits at a group level, we are selling to all ages within a group. That can mean anywhere from 18-70 year old employees. In addition, people have coverage until they are 100 years old. While covering these diverse age groups, we have found historically that 60 percent of our LTC Claims are for people under the age of 65. That defies common logic; I think many of us would think most LTC Claims are paid for policyholders age 65 years or older, but that is just not true. 

With paying so many claims for these younger demographics, many of the claims we have paid are not permanent in nature which means that, with the new riders that are coming into the market, those claims would be denied. I’ve heard some say that these instances are what Disability insurance is for; I say rubbish to that. 

Disability insurance is designed to protect your paycheck, and in America today, many people are living on multiple paychecks or from one paycheck to the next. The sad truth is that 60% of Americans today do not have $1,000 in emergency funds.¹ So that disability benefit (that the employee should buy and use) is going to cover those every day expenses like rent, mortgages, food, etc. What you have to consider is that, should a policyholder need long-term care, the LTC expenses are on top of those every day expenses and need to be paid - even if they are not permanent. Saying disability insurance is going to cover both every day expenses and non-permanent long-term care at the same time is a big stretch and could be a huge financial risk for a policyholder.

Another comment I have heard from those advocating for a non-permanent Chronic Care rider is that coverage for non-permanent LTC is not a big deal very few people are paid on those claims. If that is true then why did they bother to eliminate it when they refiled the rider? Some have purposely written contract language that did not have to be in the policy to exclude non-permanent triggers. If it was not a big deal and with no benefits paid wouldn’t there have been no need to pull it from the new rider?  

I know I am a bit on my soapbox, but I am passionate about life insurance and long-term care. I have a long and deep history with this product at Trustmark and its claims payment process. It’s especially important since, as we mentioned 60% of the time, we pay benefits under age 65 years of age. The proof is in the pudding; permanency matters. 

¹ Survey: Nearly 4 in 10 Americans would borrow money to cover a $1K emergency. Bankrate. 2020.