Long Term Care Insurance 101

The purpose for insurance of any kind is to provide "peace of mind" against the consequences of a catastrophe.  A well-designed long-term care policy will provide the necessary financial resources to provide for quality care - at the time and place that you need it, and allow your family to supervise your care - not provide it - 

"No well-planned retirement should be without long term care insurance. It is the very cornerstone of retirement security." 
- Suze Orman -

"Considering how hard people work for the majority of their lives with an eye towards retiring, it's surprising to find that many give little thought to actually funding (and protecting) their retirement."
- Suze Orman -

Should You Buy Long Term Care Insurance or not?  Quick Cost Comparison

You SHOULD consider buying long-term care insurance if:   
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• You want to protect your income and assets.
• You don't want to rely on Medicaid to provide for or make decisions about your long-term care needs.
• You don't want your spouse or children to face the consequences of becoming a full-time caregiver.
• You want to retain your independence and dignity.
• You want to be sure that you and your spouse will receive the best care possible at home, if you choose.
• You can afford the premiums without changing your lifetstyle.
• You already qualify for Medicaid.
• You have less than $100,000 in liquid assets and you are living on the interest or dividends. 
• You are collecting Social Security Disability.
• Your retirement income is sufficient to pay for a Nursing Home without liquidating any assets.
• Your current income is not sufficient to pay the premiums for long-term care insurance and they would be a financial burden for you.  

IF:

1)      You or someone that you know has a current/previous experience with someone needing Long Term Care.
2)       You or someone that you know has been or is currently a caregiver.
3)       You or someone that you know has suffered the consequences of being a caregiver.
4)       You understand that your care will have seriously consequences to your spouse and/or children.
                                                                        THEN:
Print this, read this, but don't ignore this.  This comes with 23 years experience.

Remember, a good policy is a policy that is still in force on the day that you need it.  The premium should be affordable so that it does not impact your current lifestyle.  Design your own plan.

• Elimination period  - This is your "deductible" – the period of time that you must wait before receiving benefits - I generally recommend 90 or 100 days depending on the company and your budget.  A zero day elimination period is certainly better, but premiums will be increased by 10-20%.  

• HHC Elimination period How long before benefits for Home Care kick in? –  I generally recommend zero day HHC elimination period.  You could have a 100 day elimination period for a nursing home to coordinate with Medicare, but have a zero day elimination period for HHC.

• Daily Facility Benefit  - What daily amount of money do you want to receive if you need care in a Nursing Home? 

• Daily Home Care Benefit - What daily amount of money do you want to receive if you needed care in at Home?   It could be the same or a percentage of your Nursing Home Daily benefit. 

• Benefit period - If you need care, how long do you want the benefits to be paid if you use the maximum daily benefit. Most policies today offer a "pool of money".  If you spend less than your maxiumum daily benefit, the benefit period will last longer.  Over 70% of those who enter a nursing home needed HHC for a minimum of 1 year, so your benefit period may last longer if you are not spending your maximum at home.

• Inflation Protection - This is the percentage that your benefits will increase each year, whether you are receiving benefits or not.  You must chose between simple & compound increases or none at all.  Depending on the company, you will have a choice of 3%, 4%, 5% or based on the CPI.  If you are under the age of 70, it is strongly recommended to purchase compound inflation protection.  Over 70 should compare the cost and determine if simple or compound inflation meets your needs.   LIVE CHAT IF YOU HAVE A QUESTION

• Daily or Monthly Benefits – You elect either a daily maximum or a monthly maximum.  Assume 2 policies; 1)  $250 daily benefit or 2) $7,500 monthly benefit.  If the cost of your care is $300 per day for 20 days, the daily benefit will only pay $5,000 because it has a maximum $250 per day limit and you will pay $1,000 out of pocket, however the monthly benefit has no daily limit so it would pay the entire $6,000.  Although both have potentially the same $7,500 per month benefit, the monthly benefit is more flexible…and about 10% more expensive. 

• Shared Care Benefit Rider – one of the best options to come along since they began designing LTCi.  It’s simple.  If you are a married or partners and both qualify for insurance, then you may combine your benefits.  Example: You both purchase a $200 daily benefit, 100 day EP, zero day Home Health Care EP, 3 year benefit period, with the Shared Care Rider.  Assuming no inflation rider for a second, each of you has a total benefit of $219,000 ($200 x 365 days x 3 years).  Once either one of you exhaust your benefit, you automatically continue receiving your spouse's, or partner's benefit.  The spouse or partner who is not on claim may have the guaranteed option to purchase additional insurance at the attained age if they need care themselves.  This rider varies greatly from company to company so compare...compare...compare. 
• Cognitive Impairment  - although most policies are now qualified and cover Alzheimer’s disease or other types of Cognitive Impairment, it is imperative to confirm.  This is a must or don’t waste your money on a policy. 

• Premium Waiver – your premiums are waived if you are receiving benefits.

• Spousal Premium Waiver – if one spouse or partner should die, the premiums are waived for both policies.  Nice option but not in lieu of more daily benefits.  Only add this rider if you are purchasing the right amount of coverage and premiums are not as much an issue.
• Non-Foreiture rider  – continues "some" benefits if you lapse the policy.

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In addition, the most important change in coverage is now being offered by some of the LTC insurance leaders at no extra cost.  Once you qualify for benefits, household duties such as laundry, meal preparation and paying bills is included.  Additional stay at home services extend your care coverage by also paying for home modifications, durable medical equipment, medical alert systems and care giver training.  The better Insurance companies now allow you to use informal caregivers that could drastically reduce your cost, while some companies only pay for Registered, Licensed caregivers.

Your children or other family members will take care of you because they love you or, because they have no choice; you decide.  Overwhelming statistics show that they are likely to experience severe emotional and financial problems.  Over 45% of caregivers are forced to stop working or modify their work schedule as well as increasing the chances of needing care themselves.  Most children promise to never commit their parents to a nursing home, but what choice or you giving them?   

Because of those promises, many children end up dealing with a lot of guilt, because they aren't able to fulfill the promise. We need to look at this reasonably. If you are 85 years old, and your children are in their 60's, which means that if you need care, you will be relying on your children who may need care as well.  Is it reasonable to expect a 70 year old to provide long-term care for a 90+ year old parent? What choice would they have? 

The over 85 segment of the population is the fastest growing age group.  The reality of this example is more prevalent than ever.  Long Term Care Insurance preserves your dignity as well as your assets.  If you have never stood on Food Stamp line or collected Medicaid, why start at a time in your life that you deserve the best care. 

You deserve the best care and your family deserves not to be the provider.  Long Term Care Insurance is not for you.  It is for your family because you love them.

• Can your children afford to quit their jobs to take care of you?  
• Can they care for you and their own families?
• Do they live around the corner?  

Riders - each company has a variety of riders that should be discussed with a Long Term Care Specialist.

·  One Recommendation I always make to my clients is a “short & fat” policy is better than “tall & lean” policy.  I believe that you are better off with -  a $250 per day benefit for 2 years then – a $200 per day benefit for 3 years.  Both policies are about the same cost.  If you buy a $250 per day pooled benefit and only spend $200 per day, your pool of money will last for 2 ½ years.  Maybe not as long, but the average need for Long Term Care is about 2 ½ years.  The likelihood of getting the most out of your policy is increased at no additional cost.   

·  Tax Qualified Long Term Care Policy.  Most are now and you should not buy one that is not.  The LTCi is now a tax-deductible medical expense.  New York State offers a 20% Tax Credit and the Federal Gov't allpows you to list it as a Medical Deduction.  Potentially, your net cost of a LTCi policy could be only 65% - 75% of the premium.  An accountant should be consulted for more tax information.  Do you, your spouse, your children or your parents own a business?  Special Tax incentives are available depending on the structure of your company.  Call or email for more details.  

·  Marital discount is available to married couples as well as domestic partners.  Make sure you see it listed on the quote.

·  IRA Required Minimum Distribution – 76% of seniors over 70 ½ who must take their RMD distributions report that they don’t need or want to take the income.  “I just open another CD in case I need it”.  Many of my clients tell me this.  Even if you are not 70 ½ yet, you can estimate your RMD income by multiplying your IRA, 401K, 403B (these are called Qualified Funds – funds that have not been taxed yet) by 4%.  A $100,000 IRA will generate approximately $4,000 per year of FORCED income.  You must take it, so put it to good use.  It should cover your LTCi premium.