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term care policies. Written by an independent broker,
this insightful book reveals what most agents won't
tell you, plus key points to consider when comparing
LTC policies.
A step by step check list is included to help you
make a confident decision.
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Long
Term Care Insurance can help accomplish two important
tasks:
Help
pay for assistance in the event long term care
is needed
Help
protect assets better preserved for your legacy
Long
Term Care Insurance allows a person to shift a portion
of the burden of risk from themselves to a large
corporation. For pennies on a dollar a person
can protect their access to a quality of healthcare
while at the same time spending someone elses money:
namely, the insurance company's.
Since 1988 the cost of long term care has increased
an average of 6.3% compounded annually. By
2003 the national average cost for a nursing home
had reached $57,700 per year. If the historical
inflation rate continues, in 10 years we may see
that cost jump to over $106,200 per year!
And in 20 years that cost may well exceed $195,800
per year! For the average person, in a very
short time the prices of long term care rapidly
drain everything they worked so hard for.
Long Term Care Insurance can pay for a wide range
of services in the comfort of your own home, or
at a community center, an assisted living facility,
a nursing home or a hospice. And the level
of care available can extend from personal
assistance with routine activities of daily living,
such as bathing or dressing, to skilled nursing
care under the direction of a physician.
Long Term Care Insurance does this by providing
defined benefits. You know in advance what
your benefits are, what the eligibility requirements
are, and how to access the plan's features.
You'll have a certain peace of mind knowing you're
protected in the event long term care is needed.
And what's the chance of this occurring?
•
you have a 1.25% chance of using
your homeowner's insurance
•
you have a 2.5% chance of using
your automobile insurance
• and,
depending on whose statistics you study ...
you
have between a 40% and 70% chance of needing long
term care
Comparatively, the risk is very high. Without
long term care insurance you'll have to bear the
burden of the cost yourself. The typical health
insurance plan will not pay for long term care,
but to be sure, check with your insurer. If
it does, it's the rare exception. Disability
insurance is designed to replace lost income, not
pay for health care costs. Further, the benefit
age limitation is usually to 65, though a few policies
do have short term extensions beyond. The
two federally funded programs, Medicare
and Medicaid,
are restricted either in benefits or eligibility.
Medicaid, provides certain coverage for those who
qualify, essentially individuals with low income
or limited assets. The government expects
people with adequate resources to pay for their
own care. There
is a three year period prior to applying in which
the finances of the applicant are subject to examination.
This period is extended to five years if
a trust was established during the review period.
The purpose of this is to prevent an individual
from surreptitiously manipulating the program by
quickly transferring assets in order to qualify
for Medicaid. Such actions are penalized by
imposition of a period of ineligibility, the length
thereof dependent upon the value of the transfer.
Further, following the death of a Medicaid
recipient, the government will seek to recover the
cost of benefits paid from the decedent's estate,
though collection efforts may be postponed under
specific conditions. If your assets are insufficient
enough that you can qualify for Medicaid, then long
term care insurance may not be in your present best
interest. A fundamental concept of this product
is asset protection. If your resources are
such that you have little or no assets, then the
cost may exceed your financial capability.
Medicare does not generally cover long term care.
Basic Medicare pays only for medically necessary
skilled nursing facility care, and is
available only for a short time after a hospitalization.
Medicare will pay the full cost for the first 20
days. For the next 80 days it will pay the
full cost less a copayment of $109.50 per day (2004).
Thereafter Medicare pays nothing. For those
whose assets preclude Medicaid assistance and who
have no insurance coverage, the only choice is to
pay the price yourself. This is the group
at greatest risk to loose in a process called spend-down.
Spend-down can take two forms: depletion of assets
and reduction of income. The government expects
people with adequate resources to pay for their
own care. In the former case, your assets
must not exceed eligibility requirements.
In the latter case your income must not exceed eligibility
requirements. After you have spent away most
everything and after your income is sufficiently
reduced Medicaid may then provide financial assistance.
The risk of spend-down is high, 31%. The associated
cost is even higher: financially, emotionally and
mentally. Why use your own hard earned life
savings on the astounding cost of long term care
when you can shift a portion of the burden of risk
to someone else?
But be aware this is not an inexpensive product.
Some factors effecting the premium for long term
care insurance include: • your
age
• your
health
• your
lifestyle
• your
use of nicotine
• your
choice of benefits
When considering the purchase of a policy you should
measure the outlay against the weight of your assets.
Reasonably, if you can't afford long term care insurance,
can you afford the cost of long term care?
The process
starts with your decision to move forward.
First,
do you want to preserve your assets for your
legacy?
It's a straight yes or no.
The answer defines your priorities so it's important
to consider this question at the outset.
Aware that this is not an inexpensive product,
are you really willing to pay for the protection?
Think it through: on a month-to-month basis
what's really in your heart, the cash in lieu
of the protection, or the preservation of assets
and access to a quality of health care in lieu
of the cash?
Next,
are your assets sufficient to warrant the expense
of this product?
Again, it's a straight yes or no.
Sit down with a calculator and reason it out.
Be completely honest with yourself. This
author believes only you know what's important
to you, however, depending on which source you
study you may find guidelines such as:
• for an individual,
a minimum income of $30,000 to $40,000
and assets (not including
your home) of $50,000
• for a couple, a minimum
income of $40,000 to $50,000
and assets (not including
your home) of $75,000 to $100,000
Next,
is your income enough to afford the cost without
making significant financial adjustments?
Another yes or no answer.
Either you can or can't afford it. If
you answered yes to the first two questions,
but are unsure of the answer to this question
because you haven't gotten a quote, now is the
time to do so. Two rough quotes will serve
the purpose: 60 day elimination period, average
daily benefit for the area you currently live
in, 5 year benefit period. With quotes in hand
you can calculate if a premium fits within your
budget. Later you can tailor the policy for
a firmer estimate.
Finally,
take the question of affordability one step
further and project if you estimate your income
will grow to cover potential premium increases.
This last question brings to light the issue of
premium stability. While there are a couple
of companies that have never raised rates on existing
policyholders, some companies have raised premiums
as much as 50%. There are many opinions
as to the cause: some say that these companies
offered rates too low to be sustained, others
say that company claims were higher than expected,
others say the lapse rate failed to materialize.
None of it matters if you're premiums increase
so much that you can no longer afford it.
It's important to reiterate that not all companies
have raised rates such an amount, but you should
be aware that level premiums are not permanently
guaranteed with long term care insurance. The
process works as this: upon acceptance by the
insurance company you are quoted a premium for
the product. That amount is level for so
long as the company does not institute a class
rate increase. Your premium next year may
be the same as this year, but it's not guaranteed
to stay at that level for the life of the policy.
Some companies do offer a limited period of guaranteed
premium stability, such as for 5 years from the
date of origination, or a 5 year guarantee on
a rolling basis (if rates are raised you'll have
a guaranteed 5 year period before another potential
rate increase). Fully guaranteed premium
stability is only possible if you choose a limited
payment plan. Depending on the specific
insurance company and policy, premium options
such as a single pay (a one-time payment) or a
ten pay (a 10 year payment plan) may be available
for guaranteed paid-up policies. Once the policy
is fully paid for there can be no rise in premium.
This
is the point at which I recommend you stop
and evaluate before proceeding any further.
Unless you have an academic interest in
the understanding of long term care insurance,
further reading will be of limited value
until you resolve the four main questions:
Do you want to preserve your assets for your legacy?
On a month-to-month basis what's really in your
heart, the cash in lieu of the protection, or the
preservation of assets and access to a quality of
health care in lieu of the cash?
Are your assets sufficient to warrant the expense
of this product?
Is your income enough to afford the cost without
making significant financial adjustments?
Do you project your income will grow enough to absorb
potential premium increases over time?
If
you can earnestly answer yes to these questions
then we may have a basis for moving forward. Crown
Financial Services can help you find the best
policy at the best price. As an independent,
we're not limited to presenting just one company,
but can freely provide you with the resources
you need to make a sound, confident decision.
If you answered yes, then Contact Us Today!
