LONG-TERM CARE INSURANCE

The purpose of this project was to assess the viability of long-term care insurance as a product offering by Prudential Insurance Company. Long-term care insurance helps cover the cost of a person's care or supervision over the course of an illness, disability, or aging. The projection is that approximately one-half of adults in the United States will have a need for long term care at some point in their lives.

Long-term care in the United States is very costly. Similarly, long-term care insurance in the United States is very costly in comparison with other forms of health insurance.

The analyses developed for the assessment of the viability of the product indicate that the market for long-term care insurance in the United States will not grow substantially over the coming five years for reasons of (a) high premium costs for the insured and (b) increasing product costs for the insurers. Specific companies such as Prudential Insurance Company may be able to do well in the long-term care insurance market if they couple the long-term care insurance product as a part of a package of financial security products. This approach, however, likely will reduce the size of the potential market because most people with the need for long-term care insurance likely will not have the financial assets necessary to quality for the financial security package product.

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ral price inflation in the economy creates a problem for the companies issuing long-term care policies. Within the context of this issue, the companies must either (a) project future costs or (b) include price escalator clauses in the policies. The first option likely results in product prices that price a large proportion of the potential market out of the market. The second option scares potential customers away because the implication is that premium levels will become highest at the times in their lives when they are least financially capable of sustaining the costs of long-term care insurance ("States Seek to Reduce Costs of Long-Term Care", 2004). With respect to the probability that long-term care will be required by policy holders, the lengthening mean lifespan in the United States increases the probability that such care will be required at some point in the life of a policy holder. Countering this factor is the improvement in the health levels of older persons in the United States. Unfortunately, there is no crystal ball that allows providers of long-term care insurance policies to determine the interactive effects of these factors on the demand for long-term care at some distant future point (Bernet, 2004). Unive
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Approximate Word count = 3286
Approximate Pages = 13 (250 words per page)

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