One Year Later, the NAIC Endorsement of Life Insurance Policies to Pay for Long Term Care Grows in Importance

By Chris Orestis via

One year ago, everything changed for the life insurance secondary market; in July 2017, a subgroup of the National Association of Insurance Commissioners (NAIC) released the policy paper, “Private Market Options for Financing Long-Term Care” that endorsed the concept of cashing in life insurance policies to generate assets to help people pay for long-term care.

This is the position the life insurance secondary market has been promoting for years – seniors are unaware of assets in their life insurance policies that can be used while they are still alive. To have the NAIC endorse it was a watershed moment for the industry and, more importantly, people in need of financial resources for long-term care. As it turns out, the paper was just the beginning. Over the last year, it has become increasingly apparent that paying for retirement in America is a full-blown crisis in search of the answers the NAIC addressed.

Consider these trends:

  • Just as baby boomers began to hit age 65 in the 2000s, the long-term care insurance market began to shrink from 100 carriers to less than 20 while still serving eight million policies, according to the Global Long-Term Care insurance market report. The consolidation of carriers contributed to major increases in premiums that have further depressed the market for new policies.
  • For a generation that is living longer, costs in retirement are skyrocketing; for long-term care, it has reached an average cost of almost $100,000 for a year stay in a private nursing care room, according to the Genworth Cost of Care Study. By comparison, a recent Congressional proposal to create a long-term care benefit in Medicare offered a $100-a-day benefit.
  • Faced with this cost squeeze, seniors are not only less prepared for retirement than ever, many are being forced into bankruptcy protection to get out from the debts they are incurring in retirements. According to a just-published research paper, the rate of seniors filing for bankruptcy has tripled since 1991.

For those nearing retirement, it is obvious that they will need as many financial resources as they can amass. The dilemma they face is that they often don’t know just how much they need until they get there – other than it’s more than they typically think it will be.

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