Like whole life and annuities, long term care insurance is purchasing a feeling of safety.
Conventional wisdom says, absolutely yes! Their past track records are absolutely great, in large part because their main underlying investment-bonds-have done so well, especially since the 1980’s. While not fantastic investments, they have been okay investments now. These policies are generally very safe under current conditions. And even in a deeper recession there would be little reason for concern. The question is will these policies continue to be okay going forward, as the economy continues to evolve and our nation and world moves toward the” Aftershock ” Global Financial Meltdown due to our massive federal government debt.
One of the biggest misconceptions of long term care insurance {Long Term care insurance helps provide for the cost of long term care beyond a predetermined period; persons who receive long term care insurance are generally not sick, but instead are unable to perform the basic activities of daily living, such as dressing, bathing, eating, toileting, continence, transferring (getting in and out of a bed or chair) or walking} is that they are just insurance policies, and therefore they are somehow separate and protected from the dangers of the markets. But this is completely false. These instruments are investments, and they must be analyzed and managed as such.
The multitrillion dollar gorilla on our back is the massive federal debt (nearly 17 trillion dollars) and continuing to rise rapidly, the massive money printing by the Fed. will eventually cause rising inflation. Rising inflation will cause significant rising interest rates. The reason conventional wisdom on insurance is wrong is because conventional wisdom imagines low interest forever continuing.
The safety of whole life insurance, annuities, and long term care insurance is tied directly to the safety of bonds, and to a lesser extent, the safety of stocks, and real estate.
Since insurance companies are so dependent on bonds, what happens to bonds when inflation and interest rates rise will happen to insurance and annuities as well. Rising inflation will mean rising interest rates. Rising interest rates will mean falling bond values- and insurance and annuity companies which are so heavily invested in bonds will be in trouble.
What about Long Term Care Insurance?
Long-term care insurance will also not fare well as inflation and interest rates rise. since long term care insurance is generally bought when policy holders are young, these policies have a component of investing that will not be reliable when asset values are falling. An indicator even now that these policies may be challenging for some insurance companies is that many companies have already pulled out of the long term care insurance business because they cannot make enough money on their bonds to keep up with rising costs of nursing homes and other health care expenses. During the “Aftershock” Global Financial Meltdown, this kind of insurance will all but disappear.
Will you need long term care insurance?
In many cases, long term care insurance is not worth buying or keeping. An exception to this may be if you already have long term care insurance and you are in poor health now, or in your 70’s or 80’s and think you might need long term health care in the next few years, then it makes sense to hold on to your policy. But if you are in your 60’s or younger, and in good health, the odds are that you will not need long term care insurance for at least 20 years if ever. One way to avoid the need of long term care insurance is to eat healthy, exercise , get enough rest, socialize with your church or friends, etc. Only one in four people will go to a nursing home, and the average age of admission is 83, so that it could be decades before you would need this policy, and with the coming “Aftershock” Global Financial Meltdown you will not be able to count on it anyway.
Source: The Aftershock Investor – A Crash Course in Staying Afloat In A Sinking Economy