Long-term care (LTC) insurance seemed like a lucrative new product in the early 1990s, and many companies jumped into the market to offer it. Quite a few soon recognized they had made a mistake and left the market, unable to make a profit. Others have been consolidated with larger companies. Still others have found it necessary to raise premiums on policies already in force.
It is particularly important with this product to be mindful of the insurance company's strength.
Several years of additional experience have resulted in sounder underwriting and pricing, however. Better business practices and consumer-oriented regulations are in place. There is reason to believe that the LTC insurance industry turmoil is calming. But only time will tell. That is why it is particularly important with this product to be mindful of the insurance company's strength.
It is a good idea to ask each company representative you meet whether the company has ever raised the premium on a policy already in force. If the answer is "yes," you should try to satisfy yourself that there will be no premium increase on policies sold now. You can use the Internet to check the financial strength ratings of the insurance companies on your list according to three of the most widely used rating services:
A.M. Best's Financial Strength Ratings (free registration required)Moody's Investor Service (free registration required)Fitch Investors' Service
These are independent, for-profit firms not affiliated with the government or any official agency. They undertake objective and thorough insurance company research. Keep in mind, however, that their ratings reflect an opinion of an insurer's financial strength and ability to meet ongoing policyholder claims. To derive any meaning from the information, it is very important to acquaint yourself with the ratings definitions.