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5 Facts You Should Know About Long-Term Care Insurance

By the time you reach 65, chances are about 50-50 that you’ll require paid long-term care someday.
For women it can be up to 70%. If you pay out of pocket, you’ll spend over $140,000 on average. Yet
you probably haven’t planned for that financial risk. LTC insurance, which covers many of the costs of
a nursing home, assisted living or in home care — expenses that aren’t covered by Medicare.

“Long-term care is the unsolved problem for so many people“
– Christine Benz

Director of personal finance at Morningstar, an investment research firm in Chicago.

Here’s what you need to know about LTC insurance today:

  1. Traditional policies have fewer fans
    For years, long-term care insurance entailed paying an annual premium in return for financial
    assistance if you ever needed help with day-to-day activities such as bathing, dressing and eating
    meals. Typical terms today include a daily benefit of $160 for nursing home coverage, a waiting period
    of about three months before insurance kicks in and a maximum of three years’ worth of coverage.
    Premiums for LTC policies average $2,700 a year, according to the industry research firm LifePlans.
    That puts the coverage out of reach for many Americans. (One bright spot for spouses: Discounts for
    couples are common —typically 30 percent off the price of policies bought separately.)
  2. You might not need insurance … but you need a PLAN
    If you’re pulling less than 4 percent out of your savings each year for living expenses, you may be
    comfortable going without insurance. In that case, though, you’ll need to plan for that possible
    expense. That means saving more than you may have planned, and it is essential that you segregate
    your LTC kitty from the portfolio you tap for everyday income.
    If your assets are few, you may eventually be able to cover LTC costs via Medicaid, available only if
    you’re impoverished; if you have lots of money saved, you likely can pay for future care out of pocket.
    But weigh factors other than cash: Do you have home equity you could tap? Nearby children who can
    be counted on to pitch in? Or do you have a family history of dementia that puts you at higher risk of
    needing care?
  3. There’s a new insurance in town
    As traditional LTC insurance sputters, another policy is taking off: whole life insurance that you can
    draw from for long-term care. Unlike the older variety of LTC insurance, these “hybrid” policies will
    return money to your heirs even if you don’t end up needing long-term care. If you’re older or have
    health problems, you may be more likely to qualify for this than a traditional policy.
  4. But old-school policies are cheaper
    If all you want is cost-effective coverage — even if that means nothing back if you never need help —
    traditional LTC insurance has the edge. “Hybrid policies are usually two to three times more expensive
    than traditional insurance for the same long-term care benefits,” says Scott Olson, an insurance agent
    and co-owner of LTCShop.com in Camano Island, Wash. With hybrids, you’re paying extra just for the
    guarantee of getting money back.
    A hybrid policy may make the most sense if your alternative is to use your savings, says Forman, or if
    you have another whole life policy with a large cash value, you can roll over an existing life insurance
    policy or annuity.
  5. Speed and smart shopping pay off
    If you want insurance, start looking in your 50s or early 60s, before premiums rise sharply or worsening health rules out robust coverage. “Every year you delay, it will be more expensive,” Olson says. Initial premiums at age 65, for example, are 8 to 10 percent higher than those for new customers who are 64.

In Conclusion…

Navigating Long-Term Care is complicated. Kerry Ghormley is an Independent Health
and Life Insurance Specialist who is a Certified Long-Term Care planner. She has been
helping individuals with these decisions since 2006.

Kerry offers a no-cost or obligation Long-Term Care Planning meeting.

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