When many people think of the term "long-term care," they usually think of long-term care insurance. As a result, the first person they contact to discuss their plan for paying for long-term care is their insurance agent. Who of course, will ALWAYS recommend that they buy insurance- whether it's needed or not.
You can't really know what the appropriate LTC plan is for you until you objectively evaluate all 4 options within the context of your personal and financial situation. In order to do this, I recommend that you seek the services of an Objective Financial Advisor.
What is the difference between an Objective Financial Advisor (OFA) and a traditional advisor? For one thing, OFA's look for long-term relationships, not sales transactions. But the most important characteristic of an OFA is that they do not sell insurance or financial products. By not accepting commissions, referral fees, or kickbacks, the potential for a conflict of interest is eliminated.
http://www.objectivefinancialadvisors.com/
Government Won't Be Offering LTC Insurance to the Masses: CLASS Act is Dumped
As is the case with many Government programs, the Community Living Assistance Services and Supports Act (CLASS) looked good on paper. The CLASS Act was structured to help offset the costs incurred by millions of adults needing long-term care. The program had the potential to reduce reliance on Medicaid and provide relief for family caregivers. So what was the problem that resulted in the CLASS Act being killed?
According to Health Secretary Kathleen Sebelius, an analysis of the numbers indicated that the program was simply not economically viable. Critics were also concerned that eventually, the majority of people covered by coverage provided through the CLASS act would be those who were too sick to get private coverage.
With an estimated 15 million Americans needing some form of long-term care by 2020, it’s clear that Americans need to seriously plan ahead for paying for long-term care. Ask your financial advisor for advice or seek the services of a long-term care planning and insurance expert.
www.superiorltcmsp.com
Could Future DNA Testing Affect One's Ability to Qualify for LTC Insurance?
What would be the implications of the knowledge of one’s genetic predisposition to some condition through DNA testing? Could your health insurance contract be deemed "invalid" since you had this predisposition at the time of application? Could this sort of knowledge affect your children's ability to become employed?
A recent article in the NY Times addressed this very issue ."... even doctors who recommend DNA testing to their patients warn them that they could face genetic discrimination from employers or insurers." Although there are few examples of actual discrimination based on genetic testing, it is a valid concern. According to reports, the consensus is that most people are fearful of having their genetic "roadmap" laid out for all to see.
As an LTC Planning and Insurance expert, I also naturally began to wonder about the implications of genetic testing in regard to long-term care insurance underwriting. While testing of this sort is not currently being done, what if it were to become routine and insurance companies began to test for genetic predisposition to conditions that require extended periods of care, such as Parkinson's Disease or Alzheimer's Disease? Could people be denied coverage based on their genetic make-up?
I'm not suggesting that anyone should run out and buy LTC insurance just to avoid such a situation. But it is one more factor that has the potential for making it more difficult in the future to obtain this type of coverage.
Avoid "Negative Inheritance" with LTC Insurance
Many of our parents will need long-term care. Someone will pay for that care or a family member will provide it.
With the growing need for long-term care, and the escalating costs, economists have coined a new term: "Negative Inheritance". It's defined as the financial situation of children who have paid more for their parents care than they will ever receive from any gifts or inherited funds they could have received.
Is there a way to protect our financial security from "negative inheritance"? One strategy recommended by financial advisors is including long-term care insurance as part of the family's risk management plan. Unfortunately, not all of our parents have financial advisors, and even if they do, the advisor may not be comfortable with a discussion about the importance of integrating LTC Planning with their clients financial and estate plan.
How do we initiate a discussion of planning for long-term care with our parents? We begin by asking the big question: "Have you considered what you would do if you were to need long-term care?" If they say "Yes, as a matter of fact we have," your response should not be "Great, glad to hear it." Your response should be "That's great. I'd like to hear about your plan." And then listen carefully to see if the plan seems appropriate and practical for their situation.
If your parents have not discussed long-term care, or have given you only a vague idea of what their plan is, don't panic. Your job isn't to come up with a plan for them by yourself. Your job is to steer your parents to someone who can educate them and assist them with long-term care planning. Ideally, that person is someone they have trusted with their other financial decisions - their financial planner, CPA, or estate planning attorney. If they haven't worked with a financial professional before, then you may need to help them find an LTC Planning expert.
Even if your parents feel they have a solid plan for paying for or providing for their long-term care, it would be wise to have it reviewed by a professional specifically trained in long-term care planning.
Before having "the conversation" with your parents, it may be wise to answer for yourself the question you will be asking them: What's YOUR plan?
With the growing need for long-term care, and the escalating costs, economists have coined a new term: "Negative Inheritance". It's defined as the financial situation of children who have paid more for their parents care than they will ever receive from any gifts or inherited funds they could have received.
Is there a way to protect our financial security from "negative inheritance"? One strategy recommended by financial advisors is including long-term care insurance as part of the family's risk management plan. Unfortunately, not all of our parents have financial advisors, and even if they do, the advisor may not be comfortable with a discussion about the importance of integrating LTC Planning with their clients financial and estate plan.
How do we initiate a discussion of planning for long-term care with our parents? We begin by asking the big question: "Have you considered what you would do if you were to need long-term care?" If they say "Yes, as a matter of fact we have," your response should not be "Great, glad to hear it." Your response should be "That's great. I'd like to hear about your plan." And then listen carefully to see if the plan seems appropriate and practical for their situation.
If your parents have not discussed long-term care, or have given you only a vague idea of what their plan is, don't panic. Your job isn't to come up with a plan for them by yourself. Your job is to steer your parents to someone who can educate them and assist them with long-term care planning. Ideally, that person is someone they have trusted with their other financial decisions - their financial planner, CPA, or estate planning attorney. If they haven't worked with a financial professional before, then you may need to help them find an LTC Planning expert.
Even if your parents feel they have a solid plan for paying for or providing for their long-term care, it would be wise to have it reviewed by a professional specifically trained in long-term care planning.
Before having "the conversation" with your parents, it may be wise to answer for yourself the question you will be asking them: What's YOUR plan?
LTC Insurance: Low on the List of Priorities for Personal Insurance
Before considering long-term care insurance, it's important to prioritize your personal insurance needs. The following is our list of the most important types of personal insurance, in order of priority:
- Health Insurance: Anything can happen to our health at any time. No one in our country should be without health insurance- unexpected illnesses or accidents carry a hefty price tag. Health insurance helps a financially stable family remain secure by covering unexpected medical expenses that could otherwise devastate their financial future.
- Disability Income Insurance: If you are working and earning an income, disability income insurance can replace a portion of your income if you become disabled and are unable to work. Disability insurance is particularly important for the breadwinner of the family. However, if you are retired and/or living on investment income, disability insurance is not a concern- it only replaces working income.
- Life Insurance: If you are earning a working income and have children or others who are dependent upon your income, your death would be a financial hardship for your family. Life insurance is designed to relieve that hardship and is potentially your third most important type of insurance. However, if do not have any dependents to protect, life insurance should be moved to a lower priority on this list.
- Long-Term Care Insurance: You should consider LTC Insurance only after you have analyzed your need for the above 3 types of personal insurance.
Why Objective Financial Advice Is So Important
Over the years, I've had hundreds of people call me needing help with long-term care planning. My advice has always been the same: LTC Planning is an integral component of financial planning. Because of that, a person should seek advice from an objective financial advisor about how to plan for long-term care. The response is usually: "I'm not sure if my advisor is objective." Or, "I don't have an advisor, how do I go about finding an Objective Financial Advisor?"
One particular caller was a widow. She was only 49 and had 3 young children. Her phone rang off the hook after she received a multi-million dollar settlement for her husband's accident at work. People calling themselves financial advisors had sold her all types of financial products, including large life insurance policies on her young children. I immediately referred her to an Objective Advisor, who helped her get out of the mess she was in, including cancelling that life insurance on her kids!
Getting objective financial advice is important because the thousands of dollars you might spend on financial products you don't need can mean the difference between a carefree retirement and a retirement made up of daily struggle.
Why Objective Financial Advice Is So Important
Over the years, I've had hundreds of people call me needing help with long-term care planning. My advice has always been the same: LTC Planning is an integral component of financial planning. Because of that, a person should seek advice from an objective financial advisor about how to plan for long-term care. The response is usually: "I'm not sure if my advisor is objective." Or, "I don't have an advisor, how do I go about finding an Objective Financial Advisor?"
One particular caller was a widow. She was only 49 and had 3 young children. Her phone rang off the hook after she received a multi-million dollar settlement for her husband's accident at work. People calling themselves financial advisors had sold her all types of financial products, including large life insurance policies on her young children. I immediately referred her to an Objective Advisor, who helped her get out of the mess she was in, including cancelling that life insurance on her kids!
Getting objective financial advice is important because the thousands of dollars you might spend on financial products you don't need can mean the difference between a carefree retirement and a retirement made up of daily struggle.
Family Caregivers: The Physical and Emotional Burdens
Before you automatically raise your hand and say "I'll take care of my spouse (mother, father, aunt, etc)," make sure you realize what you're getting yourself into. Unless they've done it before, most people can't even imagine the physical and emotional exhaustion experienced by a caregiver trying to care for a full size adult- in some cases one who is twice the size of the caregiver.
Answer these questions truthfully to determine if you would realisticcally be able to take on the role of caregiver:
Answer these questions truthfully to determine if you would realisticcally be able to take on the role of caregiver:
- Will I be able to help them transfer in and out of bed? On and off the toilet?
- Will I be able to roll them over in bed to change clothing ad bedding?
- Will I be able to help them bathe or shower?
- Will I be able to get them dressed and undressed?
- Will I feel comfortable providing personal care and hygiene for them?
When Do People Need Long-Term Care?
Although we normally think of long-term care as a concern reserved for the elderly, the need for long-term care can arise at any age. Most of us are aware of younger people who have needed care, usually due to an accident or a disabling illness.
Middle-aged people can also suddenly lose the ability to care for themselves. In midlife, a need for long-term care usually results from conditions like heart disease or stroke. Mental health conditions also become more prevalent during middle age.
But the reality is that the odds of needing long-term care and the duration of the need for long-term care services begin to increase drastically as we age. The vast majority of people needing care for five years or longer fall into the 60 and older age group.
The most dramatic leap in the need for long-term care comes in the over-85 age group. Almost half of all people over 85 require some form of care, either at home or in a facility. Long-term care is a serious societal issue because this age group is the fastest growing segment of the American population. The over-85 age group will triple as a percentage of the population by 2050.
Middle-aged people can also suddenly lose the ability to care for themselves. In midlife, a need for long-term care usually results from conditions like heart disease or stroke. Mental health conditions also become more prevalent during middle age.
But the reality is that the odds of needing long-term care and the duration of the need for long-term care services begin to increase drastically as we age. The vast majority of people needing care for five years or longer fall into the 60 and older age group.
The most dramatic leap in the need for long-term care comes in the over-85 age group. Almost half of all people over 85 require some form of care, either at home or in a facility. Long-term care is a serious societal issue because this age group is the fastest growing segment of the American population. The over-85 age group will triple as a percentage of the population by 2050.
Long-Term Care Insurance and Your Personal Tolerance for Risk
Your personal tolerance for risk is an important psychological consideration when determining whether or not to purchase LTC insurance. Some people have a tolerance for financial risk, while others believe in a conservative approach and would prefer to transfer the risk to an insurance company.
People who have covered their other high-priority risks with insurance usually have a low tolerance for the financial risk of long-term care. Their philosophy is to maintain as much financial control as possible and to plan ahead for long-term care insurance.
To help you better understand your personal tolerance for risk, ask yourself these questions:
People who have covered their other high-priority risks with insurance usually have a low tolerance for the financial risk of long-term care. Their philosophy is to maintain as much financial control as possible and to plan ahead for long-term care insurance.
To help you better understand your personal tolerance for risk, ask yourself these questions:
- Have I consistently insured my family and myself for the proper types and amounts of insurance coverage, such as health, disability, and life insurance?
- If I have, do I tend to transfer the entire risk to the insurance company, or am I comfortable taking on some of the risk myself? In other words, should I consider coinsuring the long-term care risk?
Can LTC Insurance Help You to Stay Out of a Nursing Home?
Most people mistakenly view "long-term care" as synonymous with "nursing home care". The myth that a need for long-term care automatically means a nursing home confinement exists because at one time, nursing homes were the first, last, and ONLY option available for people who could no longer live at home. Now, nursing homes are just one of the many environments in an expanding continuum of long-term care.
A person needing long-term care normally progresses through a continuum of care and may entirely avoid a nursing home confinement. For example, older people experiencing the frailties of aging may be able to stay at home because they require only a minimal amount of assistance for a few hours each week. If their condition worsens and they experience problems with maintaining their balance, taking medications, or loss of memory, a move to an assisted living community is normally more appropriate than a move to a nursing home.
Unless the condition worsens, or a terminal illness develops, the need for more comprehensive care in a nursing home will probably never be required. This trend toward helping people avoid nursing home care and receive care in more comfortable settings is a bright spot in the generally somber subject of long-term care.
LTC insurance was initially created to pay for skilled nursing home care needed beyond Medicare's 20 days of coverage. But over the past several decades, legislation has been passed that requires coverage to pay for all levels of care, not just skilled care, irrespective of Medicare's benefits.
Two of the main reasons for purchasing LTC insurance are the ability to maintain current living arrangements and remain independent. Having LTC coverage could provide you with the financial resources needed to stay in your home longer or move to the more positive environment of an assisted living community.
LTC insurance may also allow you to have better access to high-quality providers who wish to maintain relationships with insurance companies. LTC insurance companies are beginning to locate and contract with providers who have demonstrated high quality work and ethics. A provider screened and recommended by an insurance company may provide better quality care than caregivers in the general population.
As our society ages, and the demand for care skyrockets, it will be those who can guarantee payment for care with private funds- either their personal assets or coverage from an LTC insurance policy - who will have access to high-quality providers.
A person needing long-term care normally progresses through a continuum of care and may entirely avoid a nursing home confinement. For example, older people experiencing the frailties of aging may be able to stay at home because they require only a minimal amount of assistance for a few hours each week. If their condition worsens and they experience problems with maintaining their balance, taking medications, or loss of memory, a move to an assisted living community is normally more appropriate than a move to a nursing home.
Unless the condition worsens, or a terminal illness develops, the need for more comprehensive care in a nursing home will probably never be required. This trend toward helping people avoid nursing home care and receive care in more comfortable settings is a bright spot in the generally somber subject of long-term care.
LTC insurance was initially created to pay for skilled nursing home care needed beyond Medicare's 20 days of coverage. But over the past several decades, legislation has been passed that requires coverage to pay for all levels of care, not just skilled care, irrespective of Medicare's benefits.
Two of the main reasons for purchasing LTC insurance are the ability to maintain current living arrangements and remain independent. Having LTC coverage could provide you with the financial resources needed to stay in your home longer or move to the more positive environment of an assisted living community.
LTC insurance may also allow you to have better access to high-quality providers who wish to maintain relationships with insurance companies. LTC insurance companies are beginning to locate and contract with providers who have demonstrated high quality work and ethics. A provider screened and recommended by an insurance company may provide better quality care than caregivers in the general population.
As our society ages, and the demand for care skyrockets, it will be those who can guarantee payment for care with private funds- either their personal assets or coverage from an LTC insurance policy - who will have access to high-quality providers.
7 Factors to Consider When Evaluating Long-Term Care Insurance Carriers
History has proven that most insurance companies that enter the LTC Insurance market will not remain in the market for an extended period of time. Therefore, the majority of companies offering LTC insurance should be avoided. Narrow your choice to those companies who fit the following criteria:
1. Longevity in the LTC insurance industry
The longer a company has been in the LTC business, the more likely they are to remain in the business. As a general rule, it is best to select an insurance company that has been in the market for 15 years or longer.
2. Financial Ratings
A strong financial rating is vital to the future of your investment in the coverage. You should select a company with an A rating or higher by the A.M. Best financial rating service. Never choose an insurance company rated less than A.
3. Name Recognition of the Insurance Company
Recognizing the name of the insurance company is an indicator that the company will remain committed to the market. Insurance companies that have built name recognition and protected a brand name over a number of decades are more likely to continue protecting their reputation.
4. Approved as a "Partnership" Company
Companies that have been approved to offer Partnership policies have gone through a stringent approval process that indicates a major commitment to the LTC insurance industry.
5. Rate Increase History
LTC insurance premium rates can be increased on existing policies if an insurance carrier can justify the rate increase to your state's insurance department. Since policies are subject to rate increases, always ask about the rate increase history of the insurance carrier being recommended. Select one of the few carriers that have done a good job with underwriting and pricing, and have a reasonable premium rate increase record.
6. Reasonableness in Premium
Choosing a company that has a lower than average premium rate could spell disaster for your future LTC Insurance plan.This is one of the few industries in which shopping for the lowest price combined with the most generous benefits is not a wise strategy. Chances are, these carriers will raise rates substantially in future years. Obviously, it also wouldn't be wise to purchase coverage from an insurance carrier with substantially higher than average premiums.
7. Stringent Underwriting Process
If an insurance carrier has a conservative underwriting philosophy, it means the company's coverage is relatively difficult to obtain. Since you have maintained your good health, you should be rewarded by being insured in a "risk pool" of people who have also mantained their good health. A stringent underwriting process is your strongest indication that the insurance carrier will also be in a good position to pay your claim in the future and will also be less likely to substantially raise your rates along the way.
1. Longevity in the LTC insurance industry
The longer a company has been in the LTC business, the more likely they are to remain in the business. As a general rule, it is best to select an insurance company that has been in the market for 15 years or longer.
2. Financial Ratings
A strong financial rating is vital to the future of your investment in the coverage. You should select a company with an A rating or higher by the A.M. Best financial rating service. Never choose an insurance company rated less than A.
3. Name Recognition of the Insurance Company
Recognizing the name of the insurance company is an indicator that the company will remain committed to the market. Insurance companies that have built name recognition and protected a brand name over a number of decades are more likely to continue protecting their reputation.
4. Approved as a "Partnership" Company
Companies that have been approved to offer Partnership policies have gone through a stringent approval process that indicates a major commitment to the LTC insurance industry.
5. Rate Increase History
LTC insurance premium rates can be increased on existing policies if an insurance carrier can justify the rate increase to your state's insurance department. Since policies are subject to rate increases, always ask about the rate increase history of the insurance carrier being recommended. Select one of the few carriers that have done a good job with underwriting and pricing, and have a reasonable premium rate increase record.
6. Reasonableness in Premium
Choosing a company that has a lower than average premium rate could spell disaster for your future LTC Insurance plan.This is one of the few industries in which shopping for the lowest price combined with the most generous benefits is not a wise strategy. Chances are, these carriers will raise rates substantially in future years. Obviously, it also wouldn't be wise to purchase coverage from an insurance carrier with substantially higher than average premiums.
7. Stringent Underwriting Process
If an insurance carrier has a conservative underwriting philosophy, it means the company's coverage is relatively difficult to obtain. Since you have maintained your good health, you should be rewarded by being insured in a "risk pool" of people who have also mantained their good health. A stringent underwriting process is your strongest indication that the insurance carrier will also be in a good position to pay your claim in the future and will also be less likely to substantially raise your rates along the way.
Is It True that My Long-Term Care Insurance Premium Can Never Be Raised?
Unfortunately, this is NOT the case but it is a common misconception. While premium rates cannot be raised due to advancing age, deteriorating health, or claims, the carrier CAN apply for a "class-wide" rate increase, which will affect all policyholders who have the same type of policy.
You can reduce your chances of having frequent premium rate increases by choosing a carrier that is highly committed to the industry, has a history of excellent premium stability, and have published their claims payment history.
You can reduce your chances of having frequent premium rate increases by choosing a carrier that is highly committed to the industry, has a history of excellent premium stability, and have published their claims payment history.
Should You Ever Replace Your Long-Term Care Insurance Policy for Another One?
The decision of whether or not to replace a current policy should be taken very seriously and analyzed by your financial advisor and a long-term care planning and insurance expert. In most cases, you have more to lose than gain by replacing an existing policy. But each situation is unique, and should be analyzed by considering the following questions:
- Is your current insurance carrier financially stable and committed to the LTC insurance industry? Do they increase your premium rates frequently?
- Has your health changed for the worse since you purchased the policy? If so, you may not qualify if you applied for coverage today.
- How long ago was the policy purchased? A policy purchased several years ago probably has a fairly low premium compared to the premium of newly issued coverage today. This may be true even if your current carrier has increased your premium rate.
Can I Purchase LTC Insurance for My Mother Without Her Knowing?
The answer to this question is no. The person who will be insured must consent to the coverage by signing an application. They must also be fully aware of the purpose of the application, understand the policy benefits, and understand the underwriting process.
However, a person may pay the premium for another person. In many cases, children pay the premium for their parents' LTC insurance coverage. If there are several children, splitting the premium may make LTC insurance an affordable option for people who could otherwise not afford it.
However, a person may pay the premium for another person. In many cases, children pay the premium for their parents' LTC insurance coverage. If there are several children, splitting the premium may make LTC insurance an affordable option for people who could otherwise not afford it.
Is There an "Ideal" Age to Purchase Long-Term Care Insurance?
Actually, the decision to purchase long-term care insurance has nothing to do with age. It has to do with whether or not you haave prioritized your other insurance needs, whether or not you can afford the premium, and your tolerance for risk.
Here are 2 good reasons why advice to wait until a "perfect age" before considering LTC insurance is dangerous:
Here are 2 good reasons why advice to wait until a "perfect age" before considering LTC insurance is dangerous:
- Long-term care insurance premiums rise with each year a person waits to purchase coverage and are also on the rise in the industry in general.
- While waiting until the "perfect age" to purchase coverage, many consumers will become uninsurable, and some may even begin to needing long-term care.
Myth that Medicare Covers Long-Term Care Persists
Despite the increase in the public's awareness about the issue of long-term care and the understanding that there's a good chance they may need it in the future, many people are still confused about who or what will cover the costs of long-term care.There continues to be the misconception that Medicare will cover the costs of long-term care. MEDICARE DOES NOT COVER EXPENSES FOR LONG-TERM CARE.
What does Medicare cover? Medicare provides health insurance coverage to Americans over age 65 and to some people with disabilities who are under age 65. It pays for physician and hospital care - NOT the expenses associated with the care of people who simply need assistance with the activities of daily living, or supervision due to cognitive impairment.
So where did people get the idea that their Medicare coverage would cover long-term care expenses? This misunderstanding is probably attributable to the wording in the Medicare Handbook. In it, it's explained that under certain conditions, Medicare covers thhe first 20 days in a skilled nursing home and another 80 days of care on a co-payment basis. But care less than 100 days is short-term care, not long-term care.
Medicare's short-term benefit is designed to partially cover rehabilitation from a serious injury or illness. There is also a three-day prior hospitalization requirement to qualify for benefits. In most cases where long-term care is needed, there is no prior hospitalization.
Now many of you reading this are saying to yourself, "but what about my Medicare Supplement policy- won't that cover my long-term care expenses?" This is another common misconception. In fact, Medicare Supplement policies only cover services approved by Medicare. These policies do not cover long-term care either.
What does Medicare cover? Medicare provides health insurance coverage to Americans over age 65 and to some people with disabilities who are under age 65. It pays for physician and hospital care - NOT the expenses associated with the care of people who simply need assistance with the activities of daily living, or supervision due to cognitive impairment.
So where did people get the idea that their Medicare coverage would cover long-term care expenses? This misunderstanding is probably attributable to the wording in the Medicare Handbook. In it, it's explained that under certain conditions, Medicare covers thhe first 20 days in a skilled nursing home and another 80 days of care on a co-payment basis. But care less than 100 days is short-term care, not long-term care.
Medicare's short-term benefit is designed to partially cover rehabilitation from a serious injury or illness. There is also a three-day prior hospitalization requirement to qualify for benefits. In most cases where long-term care is needed, there is no prior hospitalization.
Now many of you reading this are saying to yourself, "but what about my Medicare Supplement policy- won't that cover my long-term care expenses?" This is another common misconception. In fact, Medicare Supplement policies only cover services approved by Medicare. These policies do not cover long-term care either.
Affordability of Long-Term Care Insurance Decreases as Your Age Increases
Premium rates for long-term care insurance have a reputation for being "high" and may be unaffordable to some people. This is usually due to the fact that people postpone investigating coverage until they are too old to receive a reasonable premium rate.
The younger you are when you purchase LTC insurance, the lower your premium will be for the life of the policy. For every year you wait to purchase coverage, your premium will be 8-15% higher. But this percentage does not include the fact that there is an overall upward trend in premium rates in the industry as a whole. When you take this upward trend into consideration, for every year a person waits they will pay an additional 14% to 22% in premium.
This means that if a 55 year old today waits until they are 60 to purchase long-term care insurance, their premium will be at least 50% higher!
The younger you are when you purchase LTC insurance, the lower your premium will be for the life of the policy. For every year you wait to purchase coverage, your premium will be 8-15% higher. But this percentage does not include the fact that there is an overall upward trend in premium rates in the industry as a whole. When you take this upward trend into consideration, for every year a person waits they will pay an additional 14% to 22% in premium.
This means that if a 55 year old today waits until they are 60 to purchase long-term care insurance, their premium will be at least 50% higher!
Long-Term Care is NOT the same as Nursing Home Care!
Most people mistakenly view "long-term care" as synonymous with "nursing home care." The reality is that a person's care normally progresses through a continuum of care that may never require nursing home confinement.
For example, older people experiencing the frailties of aging may first require only a minimal amount of assistance in their home for a few hours each week. If the condition worsens and they experience problems with maintaining their balance, taking medications, or loss of memory, a move to an assisted living community may be the next step on the continuum of care.
Unless the condition worsens, or a terminal illness develops, the need for more comprehensive care in a nursing home will probably never be required. This trend toward helping people avoid nursing home care and receive care in a more comfortable setting is a bright spot in the generally somber subject of long-term care.
For example, older people experiencing the frailties of aging may first require only a minimal amount of assistance in their home for a few hours each week. If the condition worsens and they experience problems with maintaining their balance, taking medications, or loss of memory, a move to an assisted living community may be the next step on the continuum of care.
Unless the condition worsens, or a terminal illness develops, the need for more comprehensive care in a nursing home will probably never be required. This trend toward helping people avoid nursing home care and receive care in a more comfortable setting is a bright spot in the generally somber subject of long-term care.
Why Does It Seem Like So Many People Need Long-Term Care Compared to Earlier Decades?
The fact is, the number of people needing long-term care IS growing, and will continue to grow over the next three decades. Why? There are 3 major trends that are having a phenomenal impact on long-term care. The first trend, and the one with the biggest impact, is the "Aging of America." Driven by the baby boomers, this trend has had a significant impact on society at every social and economic level.
The second trend is related to the recent advances in medical science and the emphasis on healthy living. Both of these factors have a positive effect on longevity. But unfortunately, our bodies and minds will still eventually wear out, only at a much slower pace. Ironically, many health conscious people will need care for the last two decades or more of their lives.
The third trend is the change in the family structure. Family's are more mobile and geographically separated than in years past. Add to that the growing number of women in the workforce, and it's easy to see why PAID caregivers are becoming more in demand.
The evidence is there- there's good chance you or someone you love will need long-term care in the future. Do you have a plan?
The second trend is related to the recent advances in medical science and the emphasis on healthy living. Both of these factors have a positive effect on longevity. But unfortunately, our bodies and minds will still eventually wear out, only at a much slower pace. Ironically, many health conscious people will need care for the last two decades or more of their lives.
The third trend is the change in the family structure. Family's are more mobile and geographically separated than in years past. Add to that the growing number of women in the workforce, and it's easy to see why PAID caregivers are becoming more in demand.
The evidence is there- there's good chance you or someone you love will need long-term care in the future. Do you have a plan?
Getting Old- It Happens to All of Us!
The years pass by quickly. Plan ahead for Long-Term Care BEFORE you need it!
Don't Purchase Long-Term Care Insurance Without Inflation Protection!
The demand for long-term care services - due to baby boomers moving into their 70's and 80's - will undoubtedly result in higher long-term costs in the future. An inflation protection benefit added to your LTC insurance coverage will help hedge against these rising costs.
While it is possible to purchase LTC insurance without it, we stongly recommend that some type of protection be included in the design of every LTC insurance plan. Inflation will always be with us, with a high probability that the inflation rate for long-term care services will be higher over time than the overall economic inflation rate.
The inflation protection benefit automatically raises the benefit amount of your policy each year. Without having to think about it, or pay an increasingly higher premium each year, the benefit helps to ensure that the original objectives of your LTC Plan continue to be met.
These benefits normally offer a 5% simple or 5% compound inflation benefit. While the compound benefit is more expensive, it's normally the best choice since it is more realistically tied to probable inflation rates. The compound inflation benefit will double the benefits of your policy every 14 years. If you purchase the simple inflation benefit, the benefits will double every 20 years.
Specifically, we recommend the following:
Even with the purchase of the inflation protection benefit, it's imperative to monitor the rising cost of care in your area to make sure your plan is meeting your objectives. An annual review of coverage by your LTC Planning and Insurance expert should include a comparison of the new current costs of care with your latest inflation-adjusted benefits.
· Everyone who purchases coverage at age 70 and under should purchase the compound inflation benefit.
· If you are purchasing coverage between ages 71 and 75, ad the compound benefit adds too much to the premium, consider the simple inflation rider.
· If you are purchasing coverage after age 75, and both the compound and the simple inflation protection benefit riders are too expensive, consider increasing your benefit amount to act as a cushion against inflation. It may be more practical at these ages to purchase an additional 25% in benefit amount, for example, rather than an actual inflation protection benefit. The additional coverage acts as your protection against inflation.
Your LTC Planning and Insurance expert can guide you in this decision.
Email me at allen@superiorltc.com if you would like a complimentary e-book version.
Why Long-Term Care is a Practical Solution for 2nd Marriages
Since the number of second marriages is growing at a faster pace than ever, the need for long-term care by one partner could cause problems among children of both spouses. The likelihood is high that the older partner will need long-term care services for several years because it's common for one partner in second marriages to be considerably younger than the other.
Children born of the previous marriage(s) of the younger spouse may be apprehensive that their parent's health could be affected by providing care for an older spouse, or that an inheritance will be depleted paying for care for the older step-parent.
There are also misconceptions surrounding the Medicaid (Welfare) program. Medicaid is a needs-based program and eligibility is determined by an evaluation of a person's assets and income. Many second-marriage couples believe that if they have a pre-nuptial agreement separating their funds, they will not have to "spend down" their combined assets before qualifying for welfare. In fact, pre-nuptial agreements do not protect a couple's assets from Medicaid's spend down requirements.
Planning ahead with long-term care insurance for both partners of a second marriage can alleviate many of these concerns. Insurance can assure that neither spouse will be required to provide care personally and that assets will not be depleted paying for the partner's care. This allows both partners to protect their mental and physical health, and to pass their assets down to their own bloodline.
In addition to protecting their children's inheritance, there are other benefits to having LTC insurance coverage:
* Better access to high-quality and affordable care
* Ability to maintain current living arrangements
* Prevent dependence on family members for care
True Story Backs up MetLife's Study on the Cost of Being a Caregiver
Many people would look at that figure in disbelief. It IS a lot of money. I probably would have done the same, if I hadn’t recently spoken to a friend, who I’ll refer to as Trudy. Trudy and her husband are true budgeters and planners. Every year they go to their financial planner to make sure they are on track with their goals. Originally, the plan was to have Trudy go back to work once their 2 children were out of elementary school. By working for 6 years, both she and her husband would be able to retire before they turned 55.
You know how they say “life has a way of happening…...” By the time her children were in Junior High School, Trudy’s mom was in her late 80’s and developing signs of dementia. Trudy stepped in and for the next several years provided the care her mother needed until she passed away.
Their financial planner calculated that Trudy and her husband lost $325,000 over the years Trudy cared for her mom. It would appear from their experience that MetLife’s findings were, if you’ll allow me a pun, “right on the money.”
Why Long-Term Care is a Women's Issue
Having a written long-term care plan is important for every family in America, but particularly for women. Almost always, the female takes ultimate responsibility for the day-to-day care of a family member who is ill or disabled. In our years of working with financial professionals to assist families with LTC Planning, I have personally listened to the stories of women whose lives have been totally altered due to the long-term care needs of a loved one. Similar stories involving men are also becoming more common. But the majority of informal caregivers in our country -- almost 72% of the estimated 7 million providers of care -- are female.
Women tend to be more comfortable and skilled in the role of caregiver, especially if they’ve also had children. But providing care comes at a heavy price: with the accompanying emotional and physical stress of being a caregiver, a woman has a 63% higher risk of dying earlier than a woman of the same age who does not become a caregiver.
But the prospect of becoming a caregiver should not be the only reason for women to ask their financial professional about LTC Planning for their family—it’s also vital that they plan for their own care. Women make up the largest percentage of residents in all types of long-term care facilities, with the majority being widowed or divorced. Because women usually marry men at least a few years older than ourselves, and live about seven years longer than men, by age 85, only 13% of women are still married.
By contrast, men make up the majority of people being taken care of at home. Normally, a wife or daughter helps her husband and parents through to the end. But her resources are limited when she needs long-term care. Unable to rely on informal, unpaid care from relatives at home, older women are usually forced to rely on more formal and costly solutions, such as a nursing home.
Choices for women were limited in earlier generations. Thankfully, they now have access to the knowledge and resources needed to actively participate in planning ahead for their family’s well being. Women will always be “caretakers,” but their role today includes careful advanced planning for the potential long-term care of their loved ones and themselves. If they don’t proactively plan ahead, the comfortable and healthy retirement women envision may be greatly altered, and even cut short by the consequences of providing or receiving long-term care.
How to Save Money on Your Long-Term Care Insurance Premium
Long-term care insurance has a reputation for being expensive, especially for people who waited until they were in their 60’s or 70’s to investigate coverage. But there are ways to lower your premium amount without sacrificing significant benefits. The elimination period is the most practical way to save money on your premium. For example, an elimination period in the range of 100 days can save a significant amount of premium dollars over a lower elimination period.
The more days that you are willing to pay for your care out of pocket before your policy begins paying benefits, the lower your premium rate. You can choose a variety of elimination periods, ranging from a zero-day elimination period—which would pay benefits from the first day you needed long-term care services—to elimination periods as high as 730 days or longer.
True long-term care is needing assistance for a period beyond 100 days. Short-term care, care needed for less than 100 days, can normally be paid for without significant hardship to the person receiving the care or their family. In certain instances, a percentage of short-term care may be paid for by your health insurance or Medicare. For these reasons, always concentrate your premium dollars on true long-term care. This means choosing an elimination period of at least 100 days. Some people view LTC insurance as a highly catastrophic type of insurance, and choose elimination periods much higher than 100 days—sometimes up to 730 days or more. We caution however, that this strategy could cause unexpected problems: if a policy’s benefits cannot be accessed until several months or years after the need for care, a policyholder and their family may be tempted to delay quality caregiving that could have been received earlier.
The more days that you are willing to pay for your care out of pocket before your policy begins paying benefits, the lower your premium rate. You can choose a variety of elimination periods, ranging from a zero-day elimination period—which would pay benefits from the first day you needed long-term care services—to elimination periods as high as 730 days or longer.
True long-term care is needing assistance for a period beyond 100 days. Short-term care, care needed for less than 100 days, can normally be paid for without significant hardship to the person receiving the care or their family. In certain instances, a percentage of short-term care may be paid for by your health insurance or Medicare. For these reasons, always concentrate your premium dollars on true long-term care. This means choosing an elimination period of at least 100 days. Some people view LTC insurance as a highly catastrophic type of insurance, and choose elimination periods much higher than 100 days—sometimes up to 730 days or more. We caution however, that this strategy could cause unexpected problems: if a policy’s benefits cannot be accessed until several months or years after the need for care, a policyholder and their family may be tempted to delay quality caregiving that could have been received earlier.
Bundled Insurance Products: Don't Think You're Getting Something for Free
Policies that combine life insurance and LTC insurance are referred to by different names including "Combination policies," "Bundled Policies," or "Accelerated Death Benefit Policies."
This type of policy is a life insurance policy with an LTC insurance rider that can be used to pay for long-term care expenses. In other words, instead of having to die to receive benefits, the policy could pay benefits to cover the cost of your long-term care expenses.
The attraction is that you can own insurance coverage, and always be assured that a benefit will be paid. Agents selling this type of insurance usually emphasize that "If long-term care is not needed, at least your beneficiary will receive benefits from the life insurance portion of the policy."
It’s enticing and can make it seem that you’re getting something for free – but we all know insurance companies do not "give away" insurance. With this type of policy, you are actually paying for two types of insurance coverage, whether you need both types or not: life insurance and long-term care insurance.
The attraction is that you can own insurance coverage, and always be assured that a benefit will be paid. Agents selling this type of insurance usually emphasize that "If long-term care is not needed, at least your beneficiary will receive benefits from the life insurance portion of the policy."
It’s enticing and can make it seem that you’re getting something for free – but we all know insurance companies do not "give away" insurance. With this type of policy, you are actually paying for two types of insurance coverage, whether you need both types or not: life insurance and long-term care insurance.
If you use the long-term care portion of a $150,000 life insurance policy, coverage is reduced proportionately. For example, if you use $75,000 of your benefit for long-term care expenses, your beneficiary would collect only $75,000 at your death. But you’ve paid a premium for $150,000 in life insurance benefits, as well as a premium for the long-term care insurance benefit.
It’s best to evaluate each of your insurance needs separately. If life insurance is appropriate, purchase the best life insurance value for your particular situation. If life insurance is not appropriate, then don’t purchase it at all.
The same is true for LTC insurance: If LTC insurance is appropriate, purchase the best LTC insurance value for your particular situation. If LTC insurance is not appropriate, don’t purchase it at all.
In other words, "bundling" more than one type of insurance in the same policy normally results in a poor insurance value.
Unless You're in Poor Health....Avoid Group Long-Term Care Insurance
The LTC insurance industry is up to a new trick: Marketing LTC insurance through groups. The industry “advertises” that group LTC insurance is a better value than individual coverage. We’ll explain later in the article why this is simply NOT true.
Group LTC coverage is becoming a common option in the workplace. The employee usually pays the entire premium, but the insurance company trains the employer to “sell” the concept to their employees as a value-added benefit to being employed by the company. This is also NOT true.
Group coverage can also be purchased through associations such as AARP, or through “captive” agents who work for only one insurance company. In fact, a new twist in coverage offered through AARP, is using “captive” Genworth agents. These captive agents work directly for this one insurance company - they are not independent brokers. They’re taught how to sell this one insurance carrier’s insurance, with the commission being split between the captive agent and AARP. Group coverage can also be purchased on the internet, through the mail, or over the phone. Is this new trick - Group LTC Insurance - a good value? The short answer is: No, unless you’re in poor health.
Adverse Selection
Individually issued LTC coverage offers a better value than group LTC coverage. Why? Unlike most types of group coverage, group LTC insurance is usually MORE expensive than individually issued coverage. This is because group LTC insurance is normally issued to individuals who would not otherwise pass the typical underwriting requirements of the insurance carrier. This is called “Adverse Selection” and the result is a much higher than average number of claims. Because insurance companies know they’ll have a greater number of claims with group LTC insurance, they charge a higher premium.
In future years, adverse selection will also cause premium rates to be raised more frequently than premiums for individually issued policies. In fact, rates on older group policies, such as coverage issued through CalPers, are already being raised to the point where some families are canceling the coverage. The consequences of adverse selection spell bad news for healthy people who purchase group coverage: They subsidize the current premiums as well as the more frequent premium increases caused by the claims of those in poor health.
“But the Premium Seems so Low!”
Group LTC coverage can appear to have a much lower premium than individually issued coverage. Buyer beware! Read the coverage details. Understand the eligibility criteria. Compare these details and the benefits apples to apples with coverage that could be available on an individual basis.
For example, most group coverage does NOT offer the automatic inflation protection benefit as part of the base policy. Instead, what’s offered is an “Increase Option”, which offers the right to purchase additional coverage in the future, at of course, a much higher premium rate. This option has the appearance of inflation protection, but on closer examination, you’ll see that the coverage does not include automatic inflation protection!
Unfortunately, the “appearance” of a lower premium with group coverage has given thousands of policyholders the illusion of security — the belief that they’ve properly planned ahead for long-term care. These policyholders will end up with no meaningful long-term care insurance in force when they’re likely to need it the most. They’ll either be forced to drop the coverage because of increasingly higher premiums; or, if they keep the coverage in force, will learn that the benefits they purchased are inadequate.
Is Group LTC Coverage Ever a Good Value?
There is one situation where group coverage is worth considering. If you are unable to qualify for individually issued coverage due to health problems, you may want to consider any group coverage available to you. In this situation, work with your financial advisor and an LTC Planning and Insurance expert they recommend to weigh the pros and cons of the coverage, and to assist you with evaluating your options.
Pros and Cons
Purchasing group LTC insurance without first understanding all the pros and cons of the decision is one of the worst financial planning mistakes being made today. One of the reasons for considering LTC coverage at a younger age is to have a reasonable premium later in life. But this
will not be the case with group LTC insurance: Premiums are higher from the beginning and will be continuously higher in the future.
Group coverage has the potential for creating false security and may cause people to “start over” with the LTC Planning process at older ages. Unfortunately, at that stage in their lives they may no longer be able to qualify or afford the premiums for the coverage they need. See the accompanying chart for a summary of the advantages and disadvantages of group LTC insurance. If you are offered group coverage, speak with your financial professional and/or call us before you sign the paperwork.
Tips for Reducing Your Odds of Needing Long-Term Care
Taking a proactive approach toward life is the key to reducing your odds of needing long-term care. Improve your chances of living a long, healthy life and lower your odds of needing care by:
Staying active physically: Even a minimum level of daily physical activity makes a significant difference.
Staying active physically: Even a minimum level of daily physical activity makes a significant difference.
- Walk instead of driving whenever you can
- Garden or do your own yard work
- Join a club
- Volunteer
- Host informal potlucks for family and friends
- Join a cooking club or gourmet club
- Stay up-to-date on current affairs
- Work crossword or other types of puzzles
- Write letters
Is Your Health Good Enough to Qualify for Long-Term Care Insurance?
Long-Term Care insurance is a health-qualifying type of insurance. You must be in reasonably good health in order to obtain coverage. If your health is not good enough to qualify for coverage, no amount of premium you are willing to pay will change the fact that you're ineligible. As with all types of insurance, many times those who want coverage the most are those who can't qualify for it.
If you decide to apply for coverage, you will go through a process called underwriting. Underwriting is defined as "a process of examining, accepting, or rejecting insurance risks, and then classifying those accepted in order to charge the proper amount of premium."
The LTC insurance underwriting process consists of answering questions about your health, and may also include a physical exam and/or request for medical information from your doctor.
If you currently have certain health conditions, you will automatically be ineligible to apply for LTC insurance. Some of these conditions are ones that you would expect: Parkinson's Disease, Alzheimer's Disease, and Multiple Strokes. Others, such as Schizophrenia may not be as obvious.
In addition to the conditions mentioned above, here are some other disqualifying conditions:
If you decide to apply for coverage, you will go through a process called underwriting. Underwriting is defined as "a process of examining, accepting, or rejecting insurance risks, and then classifying those accepted in order to charge the proper amount of premium."
The LTC insurance underwriting process consists of answering questions about your health, and may also include a physical exam and/or request for medical information from your doctor.
If you currently have certain health conditions, you will automatically be ineligible to apply for LTC insurance. Some of these conditions are ones that you would expect: Parkinson's Disease, Alzheimer's Disease, and Multiple Strokes. Others, such as Schizophrenia may not be as obvious.
In addition to the conditions mentioned above, here are some other disqualifying conditions:
- AIDS
- Renal Failure
- Congestive Heart Failure
- Cirrhosis of the liver
- Diabetes with Complications
- Mental Retardation
- Severe Emphysema
- Transient Ischemic Attack
- Assistance with activities of daily living (bathing, eating, dressing)
- Home Health Care Services
- Care in a nursing home or assisted living facility
- A walker, wheelchair, medical appliance, kidney dialysis, manufactured source of oxygen
What is Long-Term Care?
In the broadest sense, long-term care is defined as a need for assistance with the normal activities of daily living. Long-term care can be due to a disability or impairment, whether it be physical or mental in nature. TRUE long-term care is care needed for a period greater than 100 days.
Various definitions of long-term care can be found throughout the industry. For example, traditional insurance agents will attempt to scare you into believing that care needed for less than 100 days is a serious financial risk. This may lead you to focus on "small dollars," while placing too little emphasis on the risk of "large dollars" caused by the need for true long-term care. Short-term care is financially and emotionally inconvenient; long-term care is financially and emotionally devastating. Don't let anyone tell you differently.
Various definitions of long-term care can be found throughout the industry. For example, traditional insurance agents will attempt to scare you into believing that care needed for less than 100 days is a serious financial risk. This may lead you to focus on "small dollars," while placing too little emphasis on the risk of "large dollars" caused by the need for true long-term care. Short-term care is financially and emotionally inconvenient; long-term care is financially and emotionally devastating. Don't let anyone tell you differently.
How to Plan Ahead for Long-Term Care
The most effective way to plan for long-term care is to clearly view LTC Planning as an integral component of the financial and estate planning process. Superior LTC developed a process called "Closing the Gap" to integrate LTC Planning with financial and estate planning. This approach has a proven track record for developing the most appropriate LTC plan for you, based on a logical and emotional analysis of your unique situation.
Close the Gap in Your Financial and Estate Plan
We've created a process that will allow you to make a deliberate decision about how you will pay for long-term care expenses. The plan that you develop using this process will be consistent with your financial and personal goals. Your decision will be an informed decision based on the knowledge gained from going through our process.
Your plan may or may not include long-term care insurance. There are 3 other ways to pay for long-term care:
The Closing the Gap process helps you to think about and answer the following questions:
Close the Gap in Your Financial and Estate Plan
We've created a process that will allow you to make a deliberate decision about how you will pay for long-term care expenses. The plan that you develop using this process will be consistent with your financial and personal goals. Your decision will be an informed decision based on the knowledge gained from going through our process.
Your plan may or may not include long-term care insurance. There are 3 other ways to pay for long-term care:
- Family
- Personal Assets
- Medical (Welfare)
The Closing the Gap process helps you to think about and answer the following questions:
- Who will provide my care if I need it? My family, a paid caregiver?
- Where will that care take place? At home, in an assisted living facility?
- How will I pay for that care? With my savings, with insurance?
There is no charge for using the Closing the Gap Online Module.
Subscribe to:
Posts (Atom)