Long Term Care Insurance

A long term care insurance policy helps put you in control when you need it most - by helping to protect your assets and to ensure that you receive quality care in the setting you want. The decision to obtain Long-Term Care (LTC) insurance may make sense in light of the fact that there's a fifty-five percent chance that you will need assistance with your activities of daily living (ADLs) later in life. Most people who buy long term care insurance are the ones who've had personal experience witnessing their mothers or fathers spend their life savings on care and they don't want that to happen to their spouse and children. Additionally, today's social and economic changes have made it more difficult for family and close friends to solely bear this burden alone. Instead share this responsibility with care facilities or in-home care agencies.

Reasons why people buy LTC insurance:

  • Burden - Do not want to be a financial or emotional burden on others.
  • Access to quality care - Being able to select a quality facility in a location of my own choosing
  • Aversion to welfare (Medicaid) - Not wanting to be dependent on the government for care.
  • Asset protection - Preserve assets for healthy spouse, inheritance for children or donation to charity.
  • Control and independence - I want to maintain personal control in the choices I make.
  • Peace of mind - Knowing I am protected instead of worrying about what could happen.

How much will LTC insurance cost?

Since State requirements vary and each person is different, the only way to know what your individual options and premium costs are is to get a quote or talk with an advisor. Premiums are based on your age, and two main benefit factors: 1) benefit amount and 2) benefit term. If you have a health problem you may not be able to get insurance or may have to pay a higher premium. Generally, LTC benefits range from $50 to $400 a day ($1500-$12,500/month) and benefit terms from 2 to 6 years. Some companies offer unlimited or lifetime benefits.

If you buy a lifetime or unlimited policy, you will receive benefits for life. Unless you have a history of Alzheimer's disease in your family or other health issues that require a long period of care, insuring for an unlimited period is more than what most people will need. If you buy anything less than an unlimited/lifetime benefit, then you will have a certain amount of insurance money available for benefits.

The annual premium for an average 50-year old male with a benefit term of 3 years and a $5,000 monthly benefit is about $2,400. A $6,000/mo benefit premium would be about $2,880. This $2,400 annual premium provides you on the first day of being insured with a "pot of money" of $180,000 (36 mo X $5,000). While you are under age 65, you would want a compound benefit increase which would double to $360,761 (or $10,000 per month) in 14.5 years. Long-term care insurance could be seen as an investment because of the almost certainty that you will need long term care.

Since State requirements vary and each person is different, the only way to know what your individual options and premium costs are is to get a quote or talk with an advisor. Premiums are based on your age, and two main benefit factors: 1) benefit amount and 2) benefit term. If you have a health problem you may not be able to get insurance or may have to pay a higher premium. Generally, LTC benefits range from $50 to $400 a day ($1500-$12,500/month) and benefit terms from 2 to 6 years. Some companies offer unlimited or lifetime benefits.

If you buy a lifetime or unlimited policy, you will receive benefits for life. Unless you have a history of Alzheimer's disease in your family or other health issues that require a long period of care, insuring for an unlimited period is more than what most people will need. If you buy anything less than an unlimited/lifetime benefit, then you will have a certain amount of insurance money available for benefits.

The annual premium for an average 50-year old male with a benefit term of 3 years and a $5,000 monthly benefit is about $2,400. A $6,000/mo benefit premium would be about $2,880. This $2,400 annual premium provides you on the first day of being insured with a "pot of money" of $180,000 (36 mo X $5,000). While you are under age 65, you would want a compound benefit increase which would double to $360,761 (or $10,000 per month) in 14.5 years. Long-term care insurance could be seen as an investment because of the almost certainty that you will need long term care.

What does LTC insurance cover and how does it work?

LTC insurance policies generally cover you if you need the services of a skilled nursing home, assisted living facility, home healthcare agency or non-medical in-home care agency. There are about a dozen national companies offering LTC and a variety of policy types available. Currently, LTC carriers pay for about 20% of the in-home care provided in the country.

LTC companies usually pay a fixed benefit per day and have a maximum annual and lifetime benefit limit they will pay for in-home care given certain necessary requirements are satisfied Some long term care insurance plans have a waiting period (deductible) before you can claim benefits for home care. Often the most needed time for assistance is at the beginning. This recovery time can be even more difficult for a single person.

If you choose a policy with a home care deductible make sure you have a plan to cover the waiting period by either paying for care yourself of having unpaid help like a friend or family member.

A physician's order is usually required as well as an initial assessment and daily care notes documenting the need for assistance with the insured's activities of daily living. Many agencies will assist you in complying with the requirements of your LTC carrier. These may include verification of policy benefits, performing a pre-evaluation, obtaining a doctor's order, completing daily care notes and billing you for their services rendered. It is generally your responsibility to pay the agency and to submit the bills to your LTC insurance carrier for reimbursement on your policy. Some agencies do all the paperwork, get paid directly by your LTC insurance company and bill you for any shortfall your insurance doesn't pay.

How to choose a good LTC policy and company?

A good plan design when judging policies is the National Association of Insurance Commissioners' (NAIC) model laws and regulations, which recommends:

  • At least one year of nursing home or home health care coverage, including intermediate and custodial care. Nursing home or home health care benefits shouldn't be limited primarily to skilled care.
  • Coverage for Alzheimer's disease.
  • An inflation protection option
  • An "outline of coverage" that systematically describes the policy's benefits, limitations and exclusions, and lets you compare it with others.
  • A guarantee that the policy cannot be cancelled, non-renewed or otherwise terminated because you get older or suffer deterioration in your physical or mental health.
  • The right to return the policy for a full premium refund within 30 days, if after having received the policy, you decide you don't want it.
  • No requirements that policyholders first:
    • Be hospitalized in order to receive nursing home benefits or home health care benefits.
    • Receive skilled nursing home care before receiving intermediate or custodial nursing home care.
    • Receive nursing home care before receiving benefits for home health care.

When researching for a long term care insurance plan you want one that requires only two (2) ADLs to trigger benefits for home, community, or nursing home care. Some plans, especially group plans require three (3) ADLs for nursing home benefits to be triggered. This means you may have to wait longer before the insurance pays.

The old adage is still true here: "if it's too good to be true it probably is." The top long term care insurance companies are similar in plans, benefits and even premiums. What distinguishes them are their underwriting guidelines and how they are structured to pay benefits.

The stricter the health guidelines, the healthier the client, the less likely a rate increase will be needed in the future. Some companies and group plans have had multiple rate increases for policyholders. You should know what is in your policy, what the deductible, benefits, exclusions, limitations, benefit eligibility, conditions, care and services definitions, and rate increase history. All companies have this information available to you. Some have a "sample policy" or an "outline of coverage" that is that is available by request.

Not all LTC policies are the same. However, over the last ten years LTC policies become more and more alike, the differences being the Elimination Periods, the Benefit Periods, and also the underwriting guidelines. One person may health-qualify for one company but not another.

Also, be sure to consider the company behind the plan. Look at its track record in terms of experience in long term care insurance, as well as its ratings and financial stability. The ten largest LTC companies in annual premium revenue are:

  • Genworth Life Insurance
  • John Hancock Life Insurance
  • Conseco Senior Health
  • Continental Casualty
  • Banker's Life and Casualty (Owned by Conseco)
  • Metropolitan Life Insurance
  • Penn Treaty American
  • Unum Life Insurance
  • MetLife Insurance
  • Life Investors Insurance

When a LTC insurance policy does not make sense:

A long term care policy would not make sense for someone with low income and little or no assets. You probably should not purchase long term care insurance if:

  • You currently receive or may soon receive Medicaid benefits;
  • You have limited income/assets and can't afford the premiums over the lifetime of your policy
  • Your only source of income is a social security benefit or supplemental security income

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