A Connecticut adviser walks a client through whether to drop long-term care coverage after a claims dispute, arguing the real decision is whether care costs should fall on an estate or on a legacy contract whose 5 percent compound rider can no longer be bought today.
A retired professor in Connecticut wanted to cancel his long-term care policy after his wife's claims turned into a two-year fight — rejected paperwork, approvals that stretched from two weeks to two months, and evenings on hold with a call center. Then his own premium notice arrived with a hike close to 9 percent. He told his adviser he was finished paying that company another dollar.
The adviser, Daniel Fagan, managing partner at Radiant Wealth Management in Connecticut, did not argue. "He was answering two different questions at once and did not seem to know it," Fagan said. The first was whether he trusted the carrier, a judgment earned over years of phone calls. The second was whether the policy he already owned still had value — a contract whose terms sit on the page, indifferent to how anyone feels about the company obligated to honor them.
The distinction matters because the professor's contract carried a 5 percent compound inflation rider purchased more than two decades ago, with a benefit pool that had grown past seven figures. New pricing on 5 percent compound riders is so high that almost nobody buys them today, and lifetime benefit periods have largely disappeared from the market. The feature that made his policy valuable is effectively extinct in current offerings.
Canceling a long-term care policy is a one-way decision. At his age and health history, no replacement product exists, so a change of mind in three years would leave nothing available. A decision that can be reversed and one that cannot are not the same kind of decision, even when the math looks identical, Fagan said.
The professor was not imagining the carrier problem. The stand-alone long-term care industry has been in slow structural decline for two decades. Insurers priced policies badly in the 1980s and 1990s, largely assuming far more people would drop coverage than actually did. When losses came, companies raised premiums or exited. By 2020 the number of carriers still writing traditional policies had fallen from more than 100 to fewer than a dozen, and class actions followed over how rate increases were disclosed.
He was also right that most people never see the catastrophic scenario. Research prepared for the Department of Health and Human Services found that while roughly 70 percent of adults who reach age 65 develop serious care needs, only 24 percent receive more than two years of paid care. Most episodes are short, and many are handled entirely by family.
The real question was never whether he liked the company. It was whether the cost of care, if it came, should come out of his estate or out of a contract he had already paid for. Medicare covers only short-term skilled nursing after a qualifying hospital stay and does not cover custodial care — the help with bathing, dressing and eating that most people need. Medicaid covers it only after assets are nearly gone. A semiprivate nursing home room in Connecticut runs roughly $182,500 a year against a national median closer to $115,000, and the home-care figures people compare against are built on 40 hours a week — eight hours a day, five days a week, with no nights or weekends.
Fagan is not arguing everyone should keep every policy. Fewer than 8 percent of adults 60 and older owned a stand-alone long-term care policy as of 2022, and most American families handle care without insurance. Self-insuring is a legitimate strategy for those with the assets, the liquidity and a genuine willingness to spend them on their own care rather than preserve them — it avoids claims disputes entirely and leaves full control over what care is bought and from whom.
The honest test, he said, is whether the plan survives being written down: what the actual number is at today's costs inflated forward 20 years, where the money comes from and what selling that asset does to everything else, who administers it if the policyholder cannot, and what happens to a surviving spouse's plan if the first spouse's care consumes the portfolio. If those questions have good answers, canceling is a real decision made on the merits.
There is a sobering finding that argues for deliberation. A study in the Journal of Risk and Insurance found that roughly a quarter of people who buy a policy at 65 let it lapse before they die, forfeiting everything they paid, with no evidence the decision was strategic. Lapse rates were meaningfully higher among people with cognitive impairment — meaning coverage is often dropped right when judgment is starting to thin, by the person least equipped to see what is coming.
Fagan asked the professor to talk to his children before deciding, not because the decision is theirs but because a long-term care decision lands on whoever coordinates the care, takes the calls and decides what gets sold and when. The difference between families that handle this well and those that handle it badly is almost never the size of the portfolio, he said — it is whether the conversation happened before the crisis or during it.
The professor made his own decision in the end, and Fagan supported it. The grievance was real; it simply answered a different question than the one the policy posed. Most hard choices in retirement have this shape, he said — somewhere under the noise sits a question you can answer, and the work is separating it from the one you answered long ago and have been re-answering ever since.
This article is for informational purposes only and does not constitute professional advice. Long-term care insurance decisions depend on individual assets, income, health, family situation and the specific terms of a policy; readers should review their own contracts and verify current premium, benefit and coverage terms against the latest official disclosures before changing any existing coverage.
