John Hancock used to be one of the biggest sellers of long-term care insurance, but they have ceased to offer it. This is becoming more and more common with insurance companies that used to offer long-term care insurance, as it’s become increasingly difficult to make a profit on it. Let’s take a look at the long-term care market in general and John Hancock in particular. We’ll then look at John Hancock’s life insurance with a long-term care rider, which they still offer.
- History of Long-term Care Insurance
- Why Did John Hancock Drop Long-Term Care Insurance?
- Jon Hancock Life Insurance With a Long-Term Care Rider
History of Long-term Care Insurance
Historically, people cared for their aging relatives at home. Then in the 1960’s, nursing homes started cropping up for those people who couldn’t take care of aging parents and grandparents. It was expensive, though, so someone thought up the idea of providing insurance to allow seniors to fund their own long-term care if they should need it. Thus, the traditional long-term care insurance market was born.
Since this was an entirely new concept, underwriters didn’t really know what they were doing. They wanted to price their products competitively, so that people could afford it (not to mention buy it). Consumers often let their life insurance lapse, so they figured the same would hold true of long-term care insurance. They priced it based on the current life expectancy and hoped for the best.
Long-term care insurance became extremely popular in the late ‘80’s and early ‘90’s. About a hundred insurance companies were offering long-term care insurance, and people were buying it. It all worked…for a while.
When policy holders started to actually use those long-term care benefits is when the bubble burst. There were so many claims by so many people that insurance companies had trouble paying them. They realized they failed to anticipate certain things:
- People hung onto to their long-term care insurance, as opposed to letting it lapse
- People were living longer
- Health care costs had risen exponentially
- Interest rates declined
The underwriters had priced the insurance way too low. The also sold the policies by promising rates would remain steady, especially if inflation protection was purchased. This led to insurance companies either refusing to pay claims, or to huge rate hikes, sometimes by as much as 100%. This led those consumers being forced to either pay higher rates or drop the insurance. All of this made the long-term care insurance market messy and unprofitable, and so many insurance companies just stopped carrying it.
Why Did John Hancock Drop Long-Term Care Insurance?
John Hancock started selling long-term care insurance in 1987 and had 1.2 million policies in force. Similar to other companies offering long-term care insurance, John Hancock decided to exit this market after realizing the prices they offered can’t sustain a profitable business. They will still service current policies, but they don’t sell long-term care insurance anymore.
They briefly flirted with offering a new product, long-term care with an increasing premium structure based on claims history and overall performance. However, very few people wanted insurance when rates fluctuated based on the company’s financial performance, so they gave up on that.
Many other companies have exited the traditional long-term care insurance market. However, there are still several companies operating in this market. Here is the list of the best traditional long-term care insurance companies. In addition, many insurance companies have started offering a better alternative product, hybrid long-term care insurance, which is the combination of life and long-term care. And here is the list of the best hybrid long-term care insurance companies.
Jon Hancock Life Insurance With a Long-Term Care Rider
You can add a long-term care rider to any permanent life insurance policy that John Hancock offers. These are:
- Universal life insurance
- Indexed universal life insurance
- Variable universal life insurance
This rider accelerates the death benefits of your policy so that they are available to you so you can pay for long-term care. You must be chronically ill, and diagnosed as such by a medical professional. You must be unable to perform at least two (out of six) ADL’s (activities of daily living) without assistance. ADL’s are:
The long-term care rider makes a maximum monthly benefit available to the policy holder, somewhere between 2% and 4% of the face value of the policy. So, for example, if you have a $750,000 life insurance policy with a 2% acceleration, $15,000 would be the maximum month benefit. You can take this until the policy is exhausted.
Long-term care riders can either be reimbursement or cash indemnity, depending on what you choose. The death benefit will be reduced by how much the LTC rider pays out.
Consumer Satisfaction Rating of John Hancock Life Insurance
John Hancock scores 739 overall on J.D. Power’s 2019 Life Insurance Study (the new study comes out in October). The median average score was 761, making John Hancock somewhat worse than average.
Consumer Affairs has many one-star reviews of John Hancock’s long-term care insurance. Since they no longer offer it, many people complain about how reluctant they are to pay claims. They also complain of reduced benefits and increased rates, which is certainly not unusual in the long-term care market. It probably doesn’t matter because they don’t sell long-term care insurance anymore anyway, but we would proceed with caution before purchasing life insurance with a long-term care rider.
Financial Strength Rating of John Hancock Life Insurance
John Hancock gets an A+ rating from A.M. Best, so they would appear to have plenty of resources to pay claims.
John Hancock is a huge company with more than 2.6 million policy holders. They still offer long-term riders on their permanent life insurance policies, so that is something to consider if you’re wondering how to pay for long-term care should the need arise. Be sure and shop around, and consider hybrid insurance, long-term care insurance and annuities to fund your long-term care costs.