Self-Insuring for Long Term Care Expenses

Of course if a person has unlimited resources they can forget Long Term Care Insurance. That means that no matter what the circumstances they can cover all the expenses associated with Long Term Care. Unfortunately that is not the majority of us. Those who think they can cover all the expenses should remember that the premium, to transfer the risk, should be considered nominal compared to the cost of care. Hopefully those self-insuring will or have also considered doing the same for their homes, cars, health, etc. Keep in mind that the statistics are staggering for using Long Term Care coverage the older we get.

Covering the Entire Expense with Long Term Care Insurance

Well over half of our clients are not taking any chances when it comes to protecting themselves with Long Term Care Insurance. They are researching the kind of facilities they might use, as well as, the kind of Home care providers that are available in their area and determining the average cost of care. They are then purchasing a policy that pays those care averages with inflation protection and electing the unlimited (lifetime) benefit. They take comfort in knowing that if, in fact, they need either care in their home, assisted living facility, or nursing home that their policies will pay for all of their expenses. This, of course, assumes that the cost of Long Term Care does not vault far ahead of inflation. One can only go on what they know and do the best job they can with that knowledge.

Sharing the Cost with Long Term Care Insurance

Also becoming very popular is Sharing the Cost. Ideally you should have a reasonable, guaranteed income and know that you can always pay a certain portion of the cost of your Long Term Care expenses. Therefore you decide to purchase a Long Term Care Insurance policy that pays, for example, two-thirds of the average cost of care in one’s geographical area. Let’s say you determine that your average care cost for home and facility care is $140 per day. If you take out a policy that pays $100 per day with inflation protection you will pay now and in the future $40 per day for the care not paid by the Long Term Care Insurance policy. This is an ideal way to keep the cost of a Long Term Care policy down yet still have adequate benefits in the event you need care. It is hard to justify covering the entire cost of care when you have a hard enough time picturing yourself needing and/or using Long Term Care.

Covering the Odds with Long Term Care Insurance

Some try to anticipate all the odds of needing Long Term Care someday and take out a policy that will pay "up to" those statistics. For instance, you may read that the average length of time a person uses a nursing home in their lifetime is two-and-a-half years. So many will take a Long Term Care policy out that pays a three year benefit. Of course, some coverage is better than none at all, but often we fail to realize that many people spend months at home before ever going into a nursing home. Also, why are those people in a nursing home instead of being cared for in their own home? Maybe they did not know that Medicare or Medicaid didn’t cover it. Again the better educated we are the better decisions we can make. If your limited benefits run out before your care does you’ll wish you would have done a little more homework.

The Cost of Waiting to Purchase Long Term Care Insurance

The real cost of waiting is best shown in a monetary format. The chart below shows why one should consider purchasing Long Term Care Insurance at the earliest age possible (even before age 55). This chart demonstrates the real cost of a person purchasing at 55 versus that same person purchasing at 65 or 75. (Obviously if the 55 year old waits to purchase at 65, inflation will have caused the $100 / day to be around $170 / day. Thus causing themselves to have to purchase $170 / day because care will cost that much 10 years later). There are several reasons why a person should purchase Long Term Care Insurance in their 40’s or 50’s rather than waiting till they’re 60’s or even 70’s. They should consider it because they face:

• Purchasing higher Daily Benefit due to increases in Nursing Facility and Home Care costs
• Paying a higher total premium. (Note savings column figures)
• Becoming uninsurable or being charged higher premiums due to the development of unforeseen medical conditions. (Note: all premiums below are based on preferred ratings. Likelihood of preferred over age 65 decreases)
• No coverage for Long Term Care with current health plan. There are people under age 65 that need Home care and Nursing Home care.
• Assuring you high quality care options, if it were ever to occur, without being a burden to anyone.

The greatest concern we have with this approach is that few companies are offering it. One must ask why there are hundreds of companies selling Long Term Care Insurance and only a couple selling Life Insurance with a rider for Long Term Care. We believe it is simply a way for those comfortable with selling life insurance to sell more life insurance. The first question you should ask yourself is do you want, any or, more life insurance? The second is do you anticipate truly needing Long Term Care benefits someday? If you want life insurance, buy life insurance. If you believe that you might need Long Term Care someday, buy Long Term Care Insurance. Being a Long Term Care Insurance Specialist takes years and commitment. Unfortunately, most agents just want another sale and really are not that concerned about the client.

If you are approached with one of these products ask them exactly what happens if you use the Long Term Care Rider for 1 year, 2 years, 3 years or longer. You will then notice that you not only overpaid for those benefits in the form of total premiums, but that your life insurance death benefit has virtually disappeared. The product is marketed heavily on the concept of "what if you never need Long Term Care". The real question is "what if you do".

You should be aware that there are Long Term Care Insurance policies with full return of premium riders. Whether you go on claim or not they refund the entire premium you paid, to your estate. Better benefits and much cheaper over the life of the policy than life insurance with LTC rider.