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Long Term Care Insurance

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Long term care planning is an integral part of financial and family planning.  Thirty years ago, there were many who sat on the side lines minimizing the element of risk associated with long term care. No more, the noise you may be hearing in the long term care insurance industry is testament to the need for long term care.  Long term care is being utilized and by more and for longer than anyone ever anticipated.  And the expense of that care is exorbitant. 

The good news is that wherever there is financial need, the solution will usually fit within the laws of large numbers.  This means that the larger the pool of subjects are, and the more predictable an outcome can be, there will be a greater chance that insurance will cover that need. The actuaries have gotten better, prices for long term care have increased, and unlimited benefits on traditional policies have been eliminated.  New options include linked benefits and long term care riders on life insurances and annuities.  The cost-value of long term care insurance in combination with tax incentives for these products provides the best leverage for our hard earned dollars to fund long term care. 

While you may be thinking about insuring for long term care, please keep in mind the decision has already been made.  You are self-insuring by default until a decision to at least share that risk is made.  

If your health were to change today and you became uninsurable or even need care, you would privately be funding you long term care expenses, engaging in a spend down to poverty level before any government program would assist in the payments of long term care. 

Additionally, when large sums of money are involved, decisions become emotional.  Long term care planning is equally important to family planning as it is to financial planning. The question that needs to be asked is, “Does it make sense to transfer at least some of the financial risk of long term care to an insurance plan?” 

When people say they are planning on self-insuring, ask “Do you really believe you will ever need long term care?”  Because if one believed that the real potential was there, the financial calculator is pretty clear that long term care insurance is the right decision.  So what is truly holding people back?  No one wants to ever need long term care.

So ask yourself:

  • Are you surprised when people grow into old age?
  • Are you surprised when old people need care?

If you answered yes, then these statistics shouldn’t surprise you.

  • 70% of those over the age of 65 will use long term care.
  • 50% of those who have long term care insurance are using their benefits.

So how much does long term care cost?  Long term care is expensive.  Home care range from $20 to $30/hour in home care on average.  And assisted livings can range from $5000 to $12,000/month depending on the level of luxury and care needs.  And nursing homes, which have become a place for the very poor and very sick, a lousy financial mix and a place where no one wants to go, $9,000 to $16,000/month.  Healthier, wealthier people stay in their own home with caregivers, or buy into continuing care communities and live in independent living setting with their meals and laundry all set, and add caregivers as needed so even within the community, they don’t necessarily have to progress out of their home setting.  Specialty dementia unit typically cost from $6,000 to $12,000/month.

Men on average will use 2.2 year of long term care and woman 3.7.  But keep in mind this is just the average.  We all know people using 5 to 8 years of care, which means that longer stays are not a rare anomaly.

Small policies have great value.  In Massachusetts, a small policy can protect a primary home up to $750,000 from Mass Health Lien.  In other states, partnership protects assets up to the numbers of dollars paid out of a long term care policy.  Having access to long term care dollars early in a claim when emotions and stress are the highest has great value.  Some care won’t last more than 2 years.  A small policy gives a break to family members to hire certified nurse’s aides on a daily basis or more time over a fewer number of days based on the policy design.

Those with money typically spend more on long term care.  They want quality and consistency, the newest and the most comprehensive and that costs much more than the average.  Families of wealthier families are usually not as accessible or interested in providing primary care and so the need for geriatric management is often needed as well.

Long term care is so much more than financial planning.  Long term care insurance says to the family, “I have prepaid the long term care expenses; I don’t expect you to provide primary care”, “I don’t want you having to choose between your own kids and my care, or your career and my care.”  You prevent the potential discourse between siblings of deciding to provide care themselves or to protect the estate. 

When families decide who is to be the caregiver, it is rarely fair; it is the one who lives closest, the one without kids, the one makes less at their job.  Care giving is stressful and the majority of care givers are diagnosed with depression.  The primary reason men enter facility care settings is that their spouse gets injured or too exhausted to continue with primary care giving.  Children often have to give up promotions, lose job time, impact their own relationships to provide care.  And rarely is the distribution of care equal among family members.  While short term care often brings families together, long term care can tear families apart.

The question is not who will be caring for you but what caring for you will do for the ones you love.

So, what does insurance cost?  The cost is related to age, couples status, health and policy design.  Insurance leverages your premium for benefit, and with the multiple tax incentives, long term care insurance is much more affordable than paying for long term care out of pocket.  If you have a business the premiums may be deductible and the benefit will still be received tax free. 

There are really only two decisions, because if you buy long term care insurance and need it, it’s a win, and if you don’t buy long term care insurance and don’t need it, it’s also a win.  So the real question is, “Is it better to purchase insurance and not need or to need long term care insurance and not have it?"

With options of return of premium or linked products that leave death benefits when the LTC is not needed, the decision can be flexible.  If you need long term care, you’re insured; and if you don’t need it, you get your money back.  For people who have already allocated private funds for long term care, often moving a lump sum into a single pay provides not only greater long term care leveraging, but leverages a tax free death benefit.  Several of these policies can also be owned by trusts.

Linda Thalheimer’s started her career in insurance as a long term care insurance specialist.  With her background in health care, her masters in healthcare administration, experience billing insurance companies and with 15 years of educating, selling and making claims on long term care policies, Linda is truly an expert across the spectrum.She educates clients about the language of contracts while making it easy reviewing from the glossy folders. 

She is independent and can quote on all the long term care products; traditional, linked and riders.  She is competent working with underwriters to get clients the best ratings. Linda is committed to the ethical and knowledge responsibilities of being an adviser.