Do you know what you have, and do you have what you need?

Questions and Answers


What are the most important things I should know about long term care insurance?

You must health-qualify for long term care insurance. Not everyone can. Because health changes, especially as you grow older, it's smart to look into this well before you reach retirement age (many consider the 50’s as fragile years, when problems start popping up, so this is typically a good time to look into long term care insurance before the changes begin.)

Long term care insurance can be far more affordable than most people think. Cost is an issue; so you need to know there are many ways to make this protection affordable.  Even a small policy has great value.

Rates (Premiums) can vary significantly from one insurer to another. Each insurer has pricing "sweet spots" based on your age, gender, partner or marital status and health issues when applying. Available discounts and options can vary too. It is important to work with someone with access to policies from multiple insurers so that you have the best option for your specific situation.

For example, here are yearly rates for basically equal coverage from four insurers for a couple ages 60 and 55. $3,133 (Genworth), $3,138 (John Hancock), $4,301 (New York Life), $5,148 (Northwestern Mutual).

Health qualifications can also vary from one insurer to another. If you're in great health, don't use tobacco products, take no medications -- then every insurer will accept you. Each insurer sets their own health-qualifications and they change from time to time. Be prepared to share information with an insurance professional. You want them matching you with the company offering the best protection for the best price.

You're only going to buy long term care insurance once. Deciding to buy long term care insurance is a financial and emotional decision. But, it's different than buying car or home insurance, which people switch from time to time. It's almost never economically advantageous to switch (primarily because costs are based on your age at application). Many people sell long term care insurance. Make sure you work with someone who really knows this business. It will save you money and yield benefits for many years to come.

So, when it comes to long term care insurance, what are the biggest mistakes to avoid?


Waiting too long to start planning. You don't have to buy insurance protection today; but at least find out what a policy will cost. If you take prescription medications or have health conditions, find out if you can health qualify. Ask what health changes might make you ineligible to health qualify. Purchasing long term care insurance is less about age and more about the expectation that you will be self-sufficient in retirement years. 

Believing it won't happen to you. Denial is the best reason not to plan. And, honestly, we hope you live a long life … never have an accident or illness. Yes, we hope you never need long term care. But I’m sure you are not surprised when people grow into old age, and when older people need some care. 

Counting on government programs. Most government programs to fund long term care require impoverishment.  But even if you could get the government benefits, keep in mind that long term care is a business like anything else.  And the government rarely pays full price or in a timely manner.  Most of the quality home care agencies, the vast majority of assisted livings and all community care communities only take private pay. 

Not working with a long term care insurance professional.  Many financial planners offer insurance products, but before you depend on your investment adviser to recommend insurance products, check to see how many of the products he/she has access to.  Check to see if he/she has read and compared the contracts.  Ask if he/she is aware of the tax incentives? Two designations to be looking for are the CLTC (certification in long term care) and the LIA (licensed insurance adviser).

How Many People Have Long Term Care Insurance?

Some 8 million Americans have long term care insurance and about 400,000 new policies are issued each year (2008 data).

In 2011, the nation's long term care insurers reported $6.7 billion in claims payments to approximately 252,000 individuals.

What is Long Term Care (LTC)?

Long term care includes a wide range of medical and support services for people with a degenerative condition (say Parkinson's; or those that occur after a stroke), a prolonged illness (cancer) or a cognitive disorder (Alzheimer's).

If these make you think of conditions that affect older individuals, you are right. Most people need long term care in their later years (typically their 80s).

But, younger people need long term care as a result of accidents (falling off roofs and motorcycle accidents especially for men) or illnesses that tend to inflict younger people like Multiple Sclerosis or cancer.

Long term care is not necessarily medical care but rather "custodial care." Custodial care involves providing individual assistance with activities of daily living or the supervision of someone who is cognitively impaired.

To better understand long term care, think of the activities that you performed when you woke up this morning. You probably stepped out of your bed … walked to the bathroom … used the toilet … took a shower … got dressed … ate breakfast.

When you are healthy it is easy to take for granted these Activities of Daily Living (ADLs). However, when you or a loved one is stricken with a degenerative condition such as a stroke or Alzheimer's, performing these ADLs become impossible without the assistance of another person. As we age, performing these simple functions becomes difficult; often impossible.

Long term care is typically chronic and thus becomes very expensive. Long term care can be provided in many settings including nursing homes, your own home, assisted living facilities and adult day care.

I'm Never Going to a Nursing Home; Why Am I Reading This?

Say the words long term care insurance … and chances are you think nursing home. Today, that could not be farther from reality.  I like to think of long term care insurance as nursing home avoidance policies.    83% of claimants agree that having their long term care insurance made it easier to obtain needed services.

There are some 7.6 million individuals currently receiving care at home. 42 percent of all individual long term care insurance policy benefits went for home care.

Another 1.0 million Americans live in assisted living communities. 27.5 percent of all individual long term care insurance policy benefits went for assisted living care and costs.

Some 1.8 million Americans live in nursing homes. Many are there because Medicaid (the federal poverty program) pays for care in nursing homes. 30.5 percent of long term care insurance policy benefits paid for nursing home care.

* Source: 2010 LTCi Sourcebook, American Association for Long Term Care Insurance.

What Are My Real Chances of Needing Long Term Care?

Your chances of needing long term care are either going to be zero (0%) or 100 percent.

We can share with you a ton of great statistics provided by government and independent researchers. But none of it is really relevant to predicting whether you are going to need long term care. Your chances are going to be zero … or 100 percent. As Clint Eastwood would say, "are ya feeling lucky?" We'd rather say, "isn't it smarter to do a little planning … just in case." 

But, for those who like statistics, here's one of the best studies I've found.

Estimated Years Of Needing Long Term Care After Turning Age 65:

  • More than 5 years 20%
  • 2 to 5 years 20%
  • 1 to 2 years 12%
  • 1 year or less 17%
  • None 31%


What Do Long Term Care Services Cost?

In Massachusetts, Nursing Homes average over $300/day.  Home care is also expensive, averaging $25/hour in MA. Bringing a home health aide into your home for just 4 hour visits daily can easily cost $3000 per month. When the home care approaches 8 hour visits every day, the costs rise to $6000 per month. At this point, the care recipient often chooses to enter an assisted living setting simply for economic reasons.

If I'm On Medicare - Am I Covered?

There are 4 main ways in which to pay for long term care, cash, Medicare, Medicaid, or private insurance. Before you begin paying for long term care insurance it is critical that you plan early so you make the best decision possible.

What is Long Term Care Insurance?

Long term care insurance has been around in one form or another since the early days of Medicare. The policies during this time bear little resemblance to today's policies. While early long term care policies were similar to a basic Medicare supplement policy, today long term care insurance has evolved and typically covers a broad range of services including nursing home care, assisted living facilities and adult day care.

Like any insurance product, long term care insurance allows the insured to pay an affordable premium to protect an unaffordable catastrophic event.

What Is The Best Age To Buy This Insurance?

Interestingly, age is not a critical factor in the purchase of long term care insurance, although premiums are age based. The most important question as related to why to purchase is when you can answer the question “Barring any catastrophes or long term care expense, do you anticipate that you would be financially independent of government Medicaid programs? At any age that you can answer yes, it is likely that you will be financially independent of government poverty programs, long term care insurance needs to be considered.

What Levels of LTC Insurance Do People Buy?

The benefit level that people purchase is typically impacted by personal experiences with long term care and perception of risk as much as financial considerations. Most people purchase long term care to insure that they can afford to live at home or go to a private assisted living setting. Since the cost of these services varies by state; average benefit levels are between $100-$200/day. Duration is typically between 3 – 5 years.

What If My Employer Offers Long Term Care Insurance?

Employer sponsored long term care programs are the way to go if the employer is subsidizing your premium or if they are offering underwriting concessions.  It is always a good idea to make a comparison with individual policy options as they often offer more flexible benefits, greater preferred health and marital discounts.

I Have Savings; Why Should I Consider Insurance?

It’s really a question of whether you value your savings. Your savings become a victim of what’s called “A Spend Down” when you need care. You are required to spend down you savings until you are indigent before Medicaid starts paying for care. New laws in 2006 closed loopholes for people to hide money in property, annuities or gifting. Money can be very emotional with families so that if you think you are having difficulty thinking about just paying a premium, just imagine the impact when your family has to write checks from their inheritance for your care. 

What If I Never Use My Long Term Care Insurance?

People seem to have the mindset that if they buy long term care insurance, they had better use it (or they'd be wasting their money).

These same people would never say, "I'd better total the car this year, or that car insurance was a total waste!" … or "Gosh, I hope my home burns to the ground because I've been paying premiums now for 10 years."

Get the picture. A lot of the media coverage about long term care insurance has created the mindset that you had better use this. The truth is, long term care is not for sissies and you really don't want to find yourself needing long term care. If you purchase long term care insurance, consider yourself lucky. If you buy it and you don’t need it … you should also consider yourself lucky.

See, it's one of those true win-win situations.

Although another good option is a return of premium rider.  If you never need long term care, the premium is returned to your estate.

Are All Long Term Care Insurance Policies Similar?

No. There are some important and significant differences. Each insurer charges different rates and has different discounts and each insurer has different health underwriting criteria.

But there are other differences. Some offer reimbursement policies that pay for qualifying expenses (only up to the cost of the service). Others will provide fixed cash benefits that could be greater than the cost of actual services.   And each has different rider options, elimination options, and inflation options.

What about Life Insurance Policies with Long Term Care Benefits?

Life insurance policies that offer long term care benefits are another option to purchasing long term care protection.  True linked life, long term care products even have options of inflation protection and waiver of home care riders.  Life with long term care benefits differ from each other as well.  Some have calendar elimination periods while others are service day and some provide reimbursement benefits while others are cash. Understanding the contract language is important.   Be wary some agents get confused and are selling “critical illness riders instead of long term care riders” which are not the same. 

Statistics - Who Needs Long Term Care?

Baby boomers start turning 65 in 2011 and the number of older people will increase dramatically during the 2010 to 2030 period. The older population in 2030 is projected to be twice as large as in 2000, growing from 35 million to 71.5 million. [Source: 2009 Long Term Care Insurance Sourcebook, American Association for Long Term Care Insurance]

Between 2000 and 2040 the numbers of older adults with disabilities will more than double, increasing from about 10 million to 21 million. [Source: 2009 Long Term Care Insurance Sourcebook, American Association for Long Term Care Insurance]

More than two-fifths (42%) of people age 65 and over reported a functional limitation. Eighteen percent had difficulty with 1-2 Activities of Daily Living. Five percent had difficulty with 304 ADLs. And three percent had difficulty with five to six ADLs. [Source: 2009 Long Term Care Insurance Sourcebook, American Association for Long Term Care Insurance]

An estimated 10 million Americans needed long term care in 2000. [Rogers, S., & H. Komisar. Who needs long term care? Fact Sheet, Long Term Care Financing Project. Washington, DC: Georgetown University Press, 2003] 

Most but not all persons in need of long term care are elderly. Approximately 63% are persons aged 65 and older (6.3 million); the remaining 37% are 64 years of age and younger (3.7 million). [Rogers, S., & H. Komisar. Who needs long term care? Fact Sheet, Long Term Care Financing Project. Washington, DC: Georgetown University Press, 2003]


The lifetime probability of becoming disabled in at least two activities of daily living or of being cognitively impaired is 68% for people age 65 and older. [AARP. Beyond 50.2003: A Report to the Nation on Independent Living and Disability, 2003, (11 Jan 2005)]

By 2050, the number of individuals using paid long term care services in any setting (e.g., at home, residential care such as assisted living or skilled nursing facilities) will likely double from the 13 million using services in 2000, to 27 million people. This estimate is influenced by growth in the population of older people in need of care. [U.S. Department of Health and Human Services and U.S. Department of Labor. The future supply of long term care workers in relation to the aging baby boom generation: Report to Congress. Washington, DC]

Of the older population with long term care needs in the community, about 30% (1.5 million persons) have substantial long term care needs (three or more ADL limitations). Of these, about 25% are 85 and older and 70% report they are in fair to poor health. [The Henry J. Kaiser Foundation. Long Term Care: Medicaid’s role and challenges [Publication #2172]. Washington, DC: Author, 1999]

40% of the older population with long term care needs are poor or near poor (with incomes below 150% of the federal poverty level). [The Henry J. Kaiser Foundation. Long Term Care: Medicaid’s role and challenges [Publication #2172]. Washington, DC: Author, 1999]

Who Has LTC Insurance?  What age do people purchase it?   What benefits are most people buying?

The following industry data compiled by the American Association for Long Term Care Insurance from leading LTC insurers. Data may be used when properly sourced to: "American Association for Long Term Care Insurance, 2008 LTCi Sourcebook."  Policy data is based on 2007 applicants for individual policies.

  • 8 Million Americans are protected with long term care insurance.
  • 400,000 new Americans obtain LTC insurance coverage.
  • $3.5 Billion in LTC insurance claims paid.
  • 180,000 individuals received LTC insurance benefits.
  • $1 Million claim benefit for a single individual surpassed.

 

 

***********************************************

Facts and Figures

 ***********************************************

 

Ages When People Apply

 

Age

Selection Distribution

Under 35

1%

35 - 44

6%

45 - 54

26%

55 - 64

50%

65 - 74

15%

75 or Older

2%

 

Daily Benefit Amount

Age

Selection Distribution

Less than $50

5%

$50 - $99

5%

$100 - $149

35%

$150 - $199

33%

$200+

22%

 

Elimination Period

 

No. of Days

Selection Distribution

20 - 30 Days

7%

31 - 89 Days

7%

90 - 100 Days

83%

100+ Days

3%

 

Benefit Period

 

No. of Years

Selection Distribution

2 Years

6%

3 Years

25%

4 Years

14%

5 Years

26%

6 - 10 Years

11%

 

Age of Claimant for New Claims Opened

 

Age

Selection Distribution

Under Age 50

1%

Age 50 - 59

1%

Age 60 - 69

8%

Age 70 - 79

32%

Age 80+

59%

 

Percentage of Claims Paid

 

Type of Care

Selection Distribution

Home Care

43%

Assisted Living

31%

Nursing Home

26%