Planning For Long-term Care Insurance

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July 2012 Issue:

The Scoop: Starting a Motor Policy

Planning For Long-term Care Insurance

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Solar Aircraft

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Planning For Long-term Care Insurance

Don't grow old without it ...

Planning For Long-term Care Insurance

Act now because long-term care insurance is getting more expensive, complicated and harder to get.

Long-term care insurance is not as profitable for insurance companies as it once was. People are living longer, which drives up costs. Interest rates on investments are low, which makes it harder for companies to profitably invest premiums.

It pays to shop around for long-term care. Coverage that is nearly identical to a few years ago can cost almost twice as much today.

Besides age and health, the three factors with the most impact on premiums are: the daily benefit, the length of coverage, and the inflation protection you choose.

Make sure you are dealing with a company that you believe will continue to be in the business in the future. Some insurance companies are no longer offering the insurance. Consider working with larger companies that have larger market shares. Take advantage of a spousal discount if possible. Also, make sure you have the right inflation rider in the policy.

Insurance experts say inflation protection is the most crucial part of a policy. People in their 50s and 60s need to make sure their coverage keeps up with costs. Age 80 is typically when people make their first claims.

The most expensive and most widely recommended inflation factor is 5 percent per year. Your pool of $273,343 would grow to $726,343 in 20 years.

One insurance broker says, "The new reality is, something is better than nothing. Get what's affordable and sustainable."
If you select $250 a day for three years, you would have an "expense pool" of $273,750 ($250 x 365 x 3). If you use less than $250 a day, the pool of funds would stretch longer than three years.

You can also choose cash and flexibility. A few insurers offer policies with cash benefits up to half your monthly allowance and require no receipts. You need documentation from the doctor saying you require help with at least two "activities of daily living." With the cash option, you can hire family members to care for you or even move to a resort. Most long-term care policies will only pay for home care if given by a person with a nursing degree.

According to The Wall Street Journal, some retirees are turning to permanent life insurance policies and deferred fixed annuities packaged with long-term care benefits. They avoid the risk of spending their entire savings on nursing care. When the limits of long-term-care are reached, bills are paid from the life insurance or the annuity. Whatever is left goes to the beneficiary upon the policy holder's death.

Start your research with the Medicare.gov information page. Talk to a financial advisor or a senior advocate (at your local senior services center) about your long-term care insurance needs. It is likely that they will have some good advice. The important thing, though, is to do the research. It will pay off.

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