Jan: Since publishing Don’t Give Up on Me!, I have had dozens of conversations with adult children about their aging parents and the financial challenges of paying for elder care. The “sandwich” stage of life can quickly overwhelm families and deplete resources. One way your parents and you can plan for the expenses associated with long-term care is to purchase long-term care insurance. As you know, I have no financial relationship with insurance brokers but I do have an interest in providing you with unbiased information from trustworthy experts. I’ve invited Tobe Gerard to be a guest writer and to share with us periodically her expertise about long-term care insurance. Tobe has 30 years of experience in the insurance business and is highly regarded by her clients. Among her many commitments, she serves on the faculty of the National Alliance and educates insurance agents nationally. You may learn more about Tobe here.
I asked Tobe how she became such an advocate for long-term care insurance.
Tobe: I am a Baby Boomer and I’m living the life of so many Baby Boomers who are dealing with their aging parents. I believe that there is no other insurance protection available that can do more for families than adequate long-term care insurance. Why?
- I have seen estates depleted. Very few people can fully self-insure the costs associated with an extended long-term care situation.
- I have seen healthy spouses become so exhausted from taking care of their impaired spouses that they appear to be on death’s door themselves. One third of the “healthy” spouses actually die before the spouse for whom they have been the caregiver.
- I have seen siblings argue mercilessly. Painful things can be said when one is exhausted physically and emotionally.
I’ve experience this personally and I’ve witnessed this professionally. That’s why I am passionate about educating people about the importance of long-term care insurance.
Jan: How would I know which long-term care insurance company is best for me?
Tobe: Here is what I tell my clients to consider.
1. How long has the company been selling long-term care insurance? If the answer is less than 15 years, I’d want to be sure that they have other strong points in their favor. Longevity is important. The longer a company has been writing insurance long-term insurance policies, the more they’ve paid claims, have a sense of their lapse ratio, and have sound medical underwriting practices.
2. How important are the financial ratings of the company? Several rating services such as A.M. Best, Standard and Poors, Moody’s, Fitch, and Weiss, review insurance companies. I tend to use the Comdex which combines the ratings of all five services on a scale of 1 to 100. I try to work with companies that have a Comdex rating of 80 or above. You always want to use a company that has at least an “A” rating; an A+ or A++ is better. A “B+” or “B” may have been a good grade in high school, but it is not a good grade for an insurance company. Click here to see a list of insurance companies and their ratings.
3. How do prices compare among long-term insurance companies? If you get quotes from 4 or 5 companies, you may see some difference in premiums. Avoid any company that charges half of what others are charging. Many firms enter the long-term care insurance market with low pricing to “buy” business and then exit the market within a few years because their pricing wasn’t based upon sound principles.
4. Does the company have a reputation for aggressive rate increases? This is a difficult area to comment on because it seems that many of our tried-and-true long-term care insurance companies are filing for rate increases. I would suggest considering companies that have had reasonable rate increases rather than aggressive rate increases. Ask your agent what has been the rate increase history of the company or companies you are considering.
According to Tobe, the best time for adults to purchase long-term care insurance is between the ages of 55 and 64, when premiums are low and before a change in health may make one ineligible for insurance.
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