The question about whether a company will be around in the future is a concern about the financial stability of the insurance company. Not surprisingly, questions like this have increased since the financial chaos that started around 2008.
Sometimes these questions are the result of confusing information in the press.
You may have heard that some of the big names in the long term care insurance industry—MetLife and Prudential for example– have gotten out of the long term care business. This is often misunderstood or misinterpreted as “well those people that have policies from those companies must just be out of luck”.
It simply means that those insurance companies are not selling any additional policies.
I often use the analogy of homeowner’s insurance in Florida after several hurricanes took their toll on the state a few years. Certain companies stopped selling homeowners’ policies in Florida as a move to avoid taking on any additional risk. It was a move to increase their financial stability. They had a lot of claims and saw that they could not afford to take on any additional liability.
Those homeowner’s insurance companies were (and are) taking care of their existing clients. They were paying claims. But they were not accepting new customers.
Some long term care insurance companies have done the same thing. They have stopped taking on new risk but have continued to take good care of the people who already have policies in place.
Some companies have sold their long term care insurance policies (commonly referred to as a “book of business”) to another company that must honor all of the provisions in the original policy including paying claims. I will use the analogy (I like analogies, can you tell?) of banks—they “merge and purge” frequently. I my adult life I have never moved my checking account from one bank to another bank yet I have banked under at least five different bank names over the years. You know how that works—one bank was bought out by another and therefore their name changed.
Some long term care insurance companies have done the same.
Insurance companies are very highly regulated. They have required minimum financial reserves that must be in place.
Policyholders have protections that stockholders do NOT have. Even if a company got into financial difficulty safety nets are in place to take care of the policyholder. Guaranty Associations in each state provide additional protection.
Work with an insurance company that has a high rating and has been in the long term care insurance business for an extended period of time.
Work with an insurance advisor who will share those ratings with you and help you select an insurance company in which you feel confident.
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