Long-term care insurance is an important tool to help ease the financial toll of a sustained medical or custodial care situation. Obtaining long-term care coverage is getting more and more difficult, complicated, and costly. The cost of long-term care premiums on new and existing policies is on the rise, due to a combination of low interest rates and life expectancies exceeding actuary predations. Several large insurance companies have stopped offering new long-term care polies.
This article from the Wall Street Journal discusses seven essentials of how to find the best long-term care insurance.
Don’t Grow Old Without It
Wall Street Journal
April 9, 2012
By Kelly Greene
Below are the seven essentials, highlights of each item, and an image displaying the 2012 long-term care costs. Please refer to the Wall Street Journal article for to learn more and read the full write up of the items.
1. “Learn the three moving parts.”
Age and health are the primary factors used to determine the premium on long-term care policies, but the type of coverage includes three moving parts that make a big impact on the cost of a long-term care policy, which are “the daily benefit, the length of coverage and the inflation protection you choose.”
2. “Brace yourself for a rate increase.”
Rates cannot be raised on individual policyholders, but they can be raised on a “defined group of policyholders if they get state approval” meaning policyholders should be prepared for at least one significant increase to policy premiums.
3. “Insurers are getting pickier.”
Rejection rates are increasing. Denial rates on policies increase as you age, with “24% of those in their 60s were denied “ and you are likely to be denied if you have any chronic condition, “People with diagnosed memory loss or arthritis are almost always denied…”
4. “Go for cash and flexibility.”
Look for insurers that offer cash benefits and alternate care benefits, allowing you to choose your type of care and providing benefits regardless of if your care is provided in a traditional long-term care facility, or home care provided from a family member. “With the cash option, the insurer cuts you a check with no other questions asked, which you can use to buy care however you wish, from hiring a family member to moving to a resort.”
5. “Make the government your partner.”
A federal and state programs called the Long-Term Care Partnership, is “available in about 40 states through 30 insurers, lets people preserve some of their assets and still qualify for Medicaid if they have purchased a long-term-care insurance policy.” This helps share the burden of long-term care, allowing you “buy, say, $250,000 in coverage. If you use it up, you can qualify for Medicaid while protecting up to $250,000 in assets.”
6. “Exploit tax breaks.”
Some states offer tax credits for a portion of the cost of long-term care premiums, and federally, long-term care premiums qualify as a medical expense, which could allow for a deduction. Keep in mind special rules if you are a business owner, “the firm can deduct specified premium payments for you and your spouse, depending on your age, from your federal taxes owed. And if your business is a “C” corporation, it can deduct the entire bill.”
7. “Consider a hybrid.”
If you hate the idea of paying premiums on a policy that you might never use, hybrid policies are becoming available. “Increasingly, retirees are turning to permanent life-insurance policies and deferred fixed annuities packaged with long-term-care benefits to cover the risk of spending much of their savings on nursing care.” Some advantages include a one type purchase of the product, which prevents the risk of premium increases like seen on a traditional policy, and the benefit payouts are not taxable. The biggest downfall is the risk that this type of policies is new, and it’s possible the benefit will not be available when you need to collect. “We have no way of knowing if these policies will self-destruct in the future or not,” says Mary Ahearn, a financial planner in Cochise, Ariz. “But they are offering to lock in our risk.”
Financial Planners: Do you want to include Long-Term Care projections in your client’s financial planning reports? Information along with Long-term care projections are included in insurance reports of Silver Financial Planner and Easy Money.