Thinking about Buying Long-Term Care Insurance? Read this first.

confusion-005by Tobe Gerard, CLTC, MBA, MLS, LIA

There are many questions posed by prospective clients when they are first considering long-term care insurance (LTCi), but most begin with the disciplined questioning of the Socratic method: Who? What? When? Where? Why? How?

Who is buying? Couples and single women.

What are they buying? 50% of our clients buy traditional LTCi and 50% buy a hybrid policy that combines LTCi with life insurance. That is a huge shift from just five years ago when traditional LTCi made up 90% of our sales.
>Traditional LTCi Policies Current policies are less robust than years ago, typically they provide $4,500/month or $6,000/month, 3 or 4 year benefit period, 3% compound inflation. Couples almost always purchase the “shared” rider.
> Hybrid LTCi Policies Clients most often re-position $100,000 to fund a policy. The benefits range from $4,500 to over $6,000/month depending upon age, gender, and dollars contributed to fund the policy. The sweet spot appears to be policies that have a six year benefit period and 3% compound inflation.

When are they buying? Most people purchase LTCi in their fifties, but our clients range from 46 to 71.

Where are they buying? The states that have the most “insured lives” are CA, TX, NY, FL, IL, PA, OH, VA, NJ, WA, and MN.

Why are they buying? These are the top six reasons people purchase a LTCi policy.
#1 A desire to protect assets.
#2 A desire not to be a burden to family and other loved ones.
#3 A desire to have choices on where to receive care.
#4 A desire not to rely upon the government for their care.
#5 They have experienced using LTCi for a relative (parent, grandparent, spouse) and saw what a gift LTCi was to the family.
#6 They have experienced caring for a relative without LTCi and they saw how it drained the family’s resources financially and emotionally.

How are they buying? Many clients have been referred to us by their financial advisor, their attorney, or their accountant, although some people purchase policies through their employer; some buy through affinity groups such as college alumni associations or professional associations that offer members a discount; and others search online and buy a policy remotely from an insurance agent who sells by phone in multiple states.

Editor’s Note: For decades, the author has provided families with guidance about selecting long-term care insurance policies as well as how and when to trigger a claim. To help you become a more savvy consumer, we’ve asked Tobe to become an ongoing contributor to our blog.

Reprinted with permission from Tobe Gerard.

c 2016 Circle of Life Partners, LLC. All rights reserved.

Long-Term Care Insurance

by Joan DiGiovanni.

When did it happen that I became middle aged? I am startled to think of this, so much so that I took a moment to look up the definition of ‘middle age’ (perhaps I should have just looked in the mirror). According to the Oxford English Dictionary, it is the “period between youth and old age, about 45-60 years old.” Unfortunately, that confirms it.

Issues that were once only my parents’ concern are now my very own. Long Term Care (LTC) insurance is one such topic that I knew nothing about but wondered if it is something I need now or ever will. I was referred to Tobe Gerard a long term care insurance specialist in the Boston area; Tobe sells insurance but only long term care and has been in the business for 30 years. She was kind enough to spend some time with me recently to help me understand it.

According to Tobe, one way to look at LTC insurance is that it is a way to protect your retirement savings from being depleted and gives you peace of mind should you find yourself with a long term illness. This insurance transfers the risk from you to the insurance company in exchange for a premium. The average age today of someone buying LTC insurance is somewhere between 55-64. Keep in mind, the premiums are less expensive the younger you are and if there is a change in health and you do not have coverage, the insurance may not be available.

Generally LTC insurance covers care that your private health insurance company, Medicare or Medicaid do not. LTC is typically needed when an individual is unable to perform the basic activities of daily living (ADLs) such as dressing, bathing, eating and walking. With many chronic illnesses, long term care is necessary and no one wants to either burden a family member or deplete their life’s saving. LTC insurance coverage includes costs associated with assisted living, adult daycare, home care, nursing homes and hospice.

When considering LTC insurance, first consider your assets. If you have over $70,000 in assets and you are over 50 years old, it might be time to look into this insurance. If your assets are limited, then Medicaid and community-based programs may be more appropriate.

Once you decide LTC insurance makes sense for you, Tobe recommends a 4-pronged approach to determine your coverage:

1. Determine what the per-day cost for care would be adequate in the area you plan to live. Checking with nursing homes and assisted living facilities in that area would provide a good baseline for cost.
2. Factor inflation into the calculation; this is determined by your age when purchasing the policy.
3. Consider the elimination period—it is the period of time where you are paying out-of-pocket expenses before the policy takes effect.
4. Determine the period of time that the policy will pay benefits to you; you can choose any time between 2 years and Lifetime. Sometimes this is decided based on your budget and what is affordable, while other times it is based on your genetic predisposition to certain chronic illnesses such as Parkinson’s or Alzheimer’s.

Ironically, we do not give a second thought to purchasing insurance for our homes and cars but when it comes to protecting our quality of life most often in our final years, the issue is often overlooked. Working with a knowledgeable long term care insurance specialist like Tobe will make these decisions a lot easier. And although I am still on the younger side of that ‘middle age’ spectrum, now is the time to weigh my alternatives.

Have you or your parents purchased long term care insurance? If so, consider sharing your experience.

©Circle of Life Partners™