What are some tips to pay less for long-term care coverage?
I'm looking for ways for my husband and myself to pay less for long-term care coverage. We are in our 50's and in good health. I keep hearing bad things about traditional LTC policies. What are some alternatives?
These 6 mistakes may cause you to pay more for LTC
#1: Doing nothing or waiting too long to act.
#2: Choosing your policy based on price not value.
#3: Not taking advantage of couples’ options.
#4: Not factoring in inflation.
#5: Not knowing exactly what you’re getting with your policy.
#6: Ignoring Hybrid Policies that may save you money or get you more coverage.
Don’t put your head in the sand, you are in your 50’s. At least have the LTC discussion with your trusted Fiduciary CFP®. I like to think of investing in your LTC plan now is guaranteeing yourself some TLC later. There is real value to knowing that you and your loved ones are appropriately covered.
Hope this info helps
Securities and advisory services offered through National Planning Corporation (NPC), Member FINRA, SIPC, a Registered Investment Advisor. Trilogy Capital Trilogy Financial and NPC are separate and unrelated entities. The opinions voiced in this article are for general information only and do not constitute an endorsement by NPC. NPC does not provide tax advice. www,financialplannerLA.com
I'm going to give you an out-of-the-box alternative: don't buy any insurance for long-term care expenses. Since you say you are in good health, do everything you can to stay in good health. This means mentally, physically, spiritually, and financially.
Believe it or not, not everybody becomes so disabled that they can't perform the activities of daily living long enough to qualify for long-term care insurance benefits. Sure, the insurance industry puts out all kinds of statistics showing you what the odds are. In my opinion, however, there is a larger story behind the scenes. That story deals with the degree to which people really do take care of themselves.
As I see it, many, many people do not take proper care of themselves. Their diet is so-so. They exercise somewhat. They put up with more stress and worry then they really need to. They don't address the larger questions in life to find some peace with themselves. They don't do enough to rejuvenate themselves, so they wear down. For these folks, the odds of becoming disabled later in life are higher, and they will probably need long-term care.
I saw this happen with both my parents, and I see it happening now with other family members. I feel bad for them because they have gone through much suffering. They all say “getting old is no fun.” Fine. But you know what? It could be a lot easier if you adopt the right lifestyle.
That is where I have placed my own bet. I work very hard at living a life that gives back to me as much as I give to it. I have not purchased a long-term care insurance policy, and I don't intend to. And don't forget that I am a life insurance salesman, so I really know the importance of these kinds of policies. My bottom line is that I really can't change the fact that I'm going to die someday, and that is why I have life insurance policies. But I do believe I have a lot more control over staying able-bodied.
The main thing about long-term care is to understand the costs and what your needs will be. Traditional long-term care policies can be a great "asset", but the big issue is that they do NOT guarantee premiums for your life (they can raise later in life even if you don't have a health issue) and they can be very expensive.
Here are 5 Questions to Considder on Long-Term Care:
Long-term care is not just provided in nursing homes–in fact, the most common type of long-term care is home-based care.
1) What is long-term care?
Long-term care refers to the ongoing services and support needed by people who have chronic health conditions or disabilities. There are three levels of long-term care:
- Skilled care: Generally round-the-clock care that’s given by professional health care providers such as nurses, therapists, or aides under a doctor’s supervision.
- Intermediate care: Also provided by professional health care providers but on a less frequent basis than skilled care.
- Custodial care: Personal care that’s often given by family caregivers, nurses’ aides, or home health workers who provide assistance with what are called “activities of daily living” such as bathing, eating, and dressing.
Long-term care is not just provided in nursing homes–in fact, the most common type of long-term care is home-based care. Long-term care services may also be provided in a variety of other settings, such as assisted living facilities and adult day care centers.
2) Why is it important to plan for long-term care?
No one expects to need long-term care, but it’s important to plan for it nonetheless. Here are two important reasons why:
The odds of needing long-term care are high:
- Approximately 70% of people will need long-term care at some point during their lifetimes after reaching age 65*
- Approximately 8% of people between ages 40 and 50 will have a disability that may require long-term care services*
The cost of long-term care can be expensive:
For many, the cost of long-term care can be expensive, absorbing income and depleting savings. Some of the average costs in the United States for long-term care* include:
- $6,235 per month, or $74,820 per year for a semi-private room in a nursing home
- $6,965 per month, or $83,580 per year for a private room in a nursing home
- $3,293 per month for a one-bedroom unit in an assisted living facility
- $21 per hour for a home health aide
*U.S. Department of Health and Human Services, December 1, 2016
3) Doesn’t Medicare pay for long-term care?
Many people mistakenly believe that Medicare, the federal health insurance program for older Americans, will pay for long-term care. But Medicare provides only limited coverage for long-term care services such as skilled nursing care or physical therapy. And although Medicare provides some home health care benefits, it doesn’t cover custodial care, the type of care older individuals most often need.
Medicaid, which is often confused with Medicare, is the joint federal-state program that two-thirds of nursing home residents currently rely on to pay some of their long-term care expenses. But to qualify for Medicaid, you must have limited income and assets, and although Medicaid generally covers nursing home care, it provides only limited coverage for home health care in certain states.
4) Can’t I pay for care out of pocket?
The major advantage to using income, savings, investments, and assets (such as your home) to pay for long-term care is that you have the most control over where and how you receive care. But because the cost of long-term care is high, you may have trouble affording extended care if you need it.
5) Should I buy long-term care insurance?
Like other types of insurance, long-term care insurance protects you against a specific financial risk–in this case, the chance that long-term care will cost more than you can afford. In exchange for your premium payments, the insurance company promises to cover part of your future long-term care costs. Long-term care insurance can help you preserve your assets and guarantee that you’ll have access to a range of care options. However, it can be expensive, so before you purchase a policy, make sure you can afford the premiums both now and in the future.
The cost of a long-term care policy depends primarily on your age (in general, the younger you are when you purchase a policy, the lower your premium will be), but it also depends on the benefits you choose. If you decide to purchase long-term care insurance, here are some of the key features to consider:
- Benefit amount: The daily benefit amount is the maximum your policy will pay for your care each day, and generally ranges from $50 to $350 or more.
- Benefit period: The length of time your policy will pay benefits (e.g., 2 years, 4 years, lifetime).
- Elimination period: The number of days you must pay for your own care before the policy begins paying benefits (e.g., 20 days, 90 days).
- Types of facilities included: Many policies cover care in a variety of settings including your own home, assisted living facilities, adult day care centers, and nursing homes.
- Inflation protection: With inflation protection, your benefit will increase by a certain percentage each year. It’s an optional feature available at additional cost, but having it will enable your coverage to keep pace with rising prices.
Your insurance agent or a financial professional can help you compare long-term care insurance policies and answer any questions you may have.
Here are some options and alternatives for LTC policies as well.
Great question! Exposure to long term care expenses in retirement can demolish a retirement nest egg, and a side fund of money to pay for those possible expenses is a great strategy.
Three ways to create the money needed for long term care expenses include:
1) Long term care insurance. It can be a bit expensive, but worth checking out since you and your husband are in good health. You may be surprised how reasonable it can be. Yes, premiums can increase at a later time, but most insurance companies that offer long term care insurance have already factored in their future liability for these expenses. Prior to the present time, insurance companies underestimated their possible payouts and would adjust premiums accordingly.
2) Life insurance. Many new life insurance policies allow you to use the death benefit to help pay for long term care and critical care expenses. It's called a living benefit. You may want to consider changing your current life insurance to one of these new policies. The underwriting or approval process can be much more lenient that if you apply for long term care insurance.
3) Annuties. Many fixed and fixed index annuity policies will double or triple your annuity payout should you need long term care. And, these annuities have other wonderful benefits as well to keep your money safe and earning a nice return in the meantime.
Please check with your life insurance professional to discuss your options. Good luck!
First, traditional LTC policies have been around for decades, and if they were "bad," they would not be available. If you work with a competent agent with a competent company, you have many choices to put together a nice plan. Select the benefit amount, benefit period, elimination period, and whether to add a simple/compound factor to the benefit amount will get you started. Most policies do not require a medical exam and it is a simple application process. For a policy to be triggered in claim, most of the top carriers require that you cannot be able to perform 2 of the 6 activities of daily living. (Feed yourself, go to the restroom by yourself, bathe yourself, clothe yourself, being able to get up down out of a chair, and being able to "hold" your restroom needs) By doctor's orders, if cannot perform 2, the LTC triggers. Once triggered, it is imperative for the agent and family to keep accurate records for costs, reimbursements, and how the policy should be used for it. Many top companies have "care coordinators" to help coordinate the policy to the care needed. If done right, the policy will pay and the insurance can be a huge asset in the portfolio.
Jason R. Tate, ChFC, CLU, CASL