Get the help you need selecting the right Long Term Care Insurance.
INSURANCE OPTIONS & IMPORTANT QUESTIONS
Long Term Care Insurance Questions & Answers
How much does Long Term Care Insurance cost?
Pricing is based on several moving parts. The best we can do here is a range. We have seen prices range from a low of $500/yr per person to a high of $6000/yr per person… and everything in between.
What Factors can shift the long term care policy’s price?
AGE: average purchase age in the US is in the early 50s. Younger is cheaper, older is more expensive. Very few carriers will cover persons 80 and up.
QUALITY OF HEALTH: the healthier you are the cheaper it is. If your health is poor enough, you can’t get coverage at all. To know if you are still health eligible, you have to either speak to a very knowledgeable specialist in this type of product…or simply apply and see what you get. You can schedule time to speak to an agent by CLICK HERE .
Be sure to ask about discounts:
Spouse/Partner, Associations, and Worksite.
Top 10 Insurance Policy Shopping Questions & Answers
How much does it cost?
Answer: That depends on a lot of moving parts. Price is based on AGE, GENDER, QUALITY of health (and sometimes you can’t get it!), TYPE of product, and SIZE of benefits. We have seen prices range from a low of $1000/year to highs of $8,000 to $10,000 per year per person. And literally everything in between. The only way to know for certain is to speak with an agent. A qualified agent who specializes in this type of product can give you accurate pricing and help you winnow thru the many decisions you need to make.
~ AGE – younger is cheaper. Average purchase age in the USA today is in the late 50’s or early 60s.
~ GENDER – they charge more for females. Women live longer than their men. When a woman ages alone, she has no spouse to provide care at home for free. So women claim longer than men. Men’s claims tend to be shorter and a longer window of home care, though, because of the pattern of having a younger spouse. This will not be true on all cases – clearly it can be the. However, the stats say women make larger claims, therefore they are frequently charged more premium.
~ QUALITY of HEALTH – this is usually the biggest shocker. You have to health qualify and it is not like other insurance where you can simply pay more the worse your health is. There is a threshold beyond which no insurance company will take you. So, applying younger usually means a better chance to health qualify. About 1/3 of the 60 year olds we see cannot get coverage. By 70, it is nearly 98% that can no longer health qualify.
~ TYPE of product – this is a complex topic. You really should READ THIS blog for more details. However, in brief, you can get a true long term care only policy (pays for care, but if you die there is no payment or value…unless you pay for return of premium) OR you can purchase a linked-benefit product (also called hybrid or combination product) that has married long term care to a life policy or an annuity. These will pay for care, or pay a beneficiary if you die with no or minimal care, or you can quit out of them at any point and get some of your investment back. As you might imagine, the hybrid products cost more as you are asking the product to do more things. It’s insurance – the more benefit you fold into it, the more expensive it runs.
~ SIZE of benefits – Now we repeat ourselves: it’s insurance…the more benefit you fold into it, the more expensive it runs. Working with a someone who is knowledgeable can help you purchase smaller benefits to help keep costs down. We recommend speaking with more than one agent to see their logic thru this problem. Some will be more friendly to partial coverage than others. You want to work with the person who makes the most sense to you. Insurance is a risk-management product. Not risk certainty. No one can really know the future. You have to make your best guess and have peace with it. Some agent will “speak your logic language” and that is the person you want to work with. Further shopping my expose you to different companies or products as agents will vary on who they have access to. This is not a small financial decision. It is worth your time and energy to make the best choice for you.
Will the price ever go up, or does it remain the same?
Answer: depends on the type of contract you buy.
~ Traditional insurance products, to date, all reserve the right in the contract to raise the rates if they get regulatory approval to do so thru the Insurance Commissioner in your state and it applies to everyone who owns a policy in the state. 20 years ago, no one had a rate raise. Now…? Almost every company has had at least one. Some have had multiple. So ASK. Ask the agent what the rate raise history has been on any company you are considering. Ask if there has been a pattern to this over the years (hint: there has been…the agent should be knowledgeable enough to identify that for you).
~ Hybrid or linked benefit products: well, it depends on whether you get a 101g (Critical Illness) product or 7702b (True long term care). Further it depends on whether the underlying life chassis is a variable life product or not. So again, ASK. These hybrids are great products, but you need to ask a lot of questions to be sure you know what you are looking at. If you wish to read more about this CLICK HERE.
Will my policy pay for ever…or until I die?
Answer: Only if you pay for an “unlimited” policy. Historically these were very common. In this market…? Not so much. You can still find unlimited benefit policies, but they are more rare and much more expensive than a policy that has limited payout. While it may seem scary to pay for a limited payout, if you work with a really good agent, they can help you gauge your risk better than some wild shot in the dark. If you know the averages for care and you know a bit about your family history, you can gauge the risk yourself of having a cataclysmic, long run of care.
Further, there are ways to tailor some of the products to hedge your bets on this without having to pay a ton of money for an unlimited policy (do an internet search on “shared care” for instance). The secret to having peace of mind over the product you own, is to speak with someone who is knowledgeable enough to help you make this tough choice.
How long do I have to pay the premiums?
Answer: how did you buy it? Some policies will be pay-for-life (or until you die…or go on claim). Some will be set up as 10-pay, 20-pay (or more creative solutions like pay-to-age-90 or some such). This means you pay for a contract time (say 10 years, 20 years, or pay-to-age-90) and then you have paid the policy off; no more premium due, but it is still in force and good to use. These latter sound really good, but believe me, the insurance companies know the stats. If you opt to pay your policy off early, the insurance company will still get their full premium out of you. If you would normally pay for 30 years on pay-for-life…but opt to pay it off in 20 years, then the company calculates the premium they would get from you over the likely life span and then simply jams it all into the shortened window. So opting for shortened pay windows means you pay more now in order to pay none later. This is usually smart if you can get the policy paid off during your high income years towards the end of your work life….if you have enough spare money to fund it that way.
My mom/dad/spouse/other has just had a stroke, we need long term care insurance. Can we get it?
Answer: No. Maybe.
The “no” answer will happen if you are too soon after the stroke even though there has been full recovery. The “no” answer also occurs if you have permanent damage from the stroke (say left side paralysis or aphasia or ataxia) and it can occur if you have had full recovery but just have too much else that is going wrong in your health. Think of it like this: if your house had a bad roof or if the roof was already smoking from potential fire, would a home owner insurance company cover the house? No. Not until the roof is repaired or the smoke is fully evaluated and deemed harmless. So these products are the same. You can’t get this product if your health has the equivalent of damaged roof or smoke coming out of the walls.
The “maybe” answer: A few (and fewer each year) will cover a person who has had a stroke but has had full recovery if certain conditions are met and there is a stability window with no re-occurrence. There must also be very little else wrong with you.
The answer is the same if you insert diabetes, osteoporosis, rheumatoid or osteo-arthritis, and on and on and on… The only way to know for certain is to speak to a capable agent who can ask the right nosy questions and then tell you if you have a chance to health qualify still…or not.
I think I will wait 2 or 5 years before I buy. Won’t that save me money?
Answer:No. if you are over 40 years old, the price per unit goes up with each year you wait. So even though your mind says, “But I saved all that premium by not buying it 5 years ago” the actual math will show that you pay more over the life of ownership than if you bought it at a younger cheaper-per-unit price. Further, in the ensuing 2 or 5 or 10 years, your health took a few hits. So you are probably a health category down or even flirting with not getting coverage at all. Younger + healthier = cheaper.
I think I will just invest the money and not buy. I mean a good investment is going to beat this, right?
Answer: no. A good agent can show you the math of it for proof. But the basic answer is that you cannot out invest the policy value. NOW…if you never have care and simply die, yes, your investments have money in your estate where the insurance may not do that (or it may if you buy a hybrid or linked-benefit product). The question here is not, however, “what if I die”. We are all going to die. The question you are grappling with is “what if I live and am in care”. If you are in care, the policy hands-down will be the better financial move. Wouldn’t it be nice to have a crystal ball that worked? If you KNEW you were going to be in care, you’d get the policy without a qualm. If you KNEW you were going to die without care, you’d skip the policy with perfect peace. There is the rub: we don’t know. I will say this…if you live long enough, you have a high probability of growing fragile and needing help. Insurance is about peace of mind. What gives you peace?
How do I know if I have a good company?
Answer: do your homework. These are the questions you should ask about any company you are considering:
What is their financial rating? You want a company that rates well with Standard and Poors, Moody and Fitch, etc.
How large is their block of long term care business? Companies with larger blocks of business are more financially motivated to manage the block well and keep it in house. Companies with small blocks of this type of product often farm the claim process out to a third party vendor. Neither of these options is better than the other. But you want to know that 20 or 30 years from now when you make a claim, will you or your family be dealing with that company? Or will you be farmed out to another company? If you are buying on brand name recognition, this answer matters. If you are simply going for the cheapest price you can find, this answer may not matter to you.
What is their complaint index with your Insurance Commissioner? Most Commissioners have a website where you can look up the complaint index. If not, call the office. Someone can tell you. Companies with a high complaint index should be avoided. This means they have had lots of rate hikes, are difficult to work with at claim or other things you’d rather not buy into.
How long have they been selling this type of product? This helps you interpret #2 and #3 above. If they have been selling this only a short time, then perhaps there is a reason for the low complaint index and small block of business. Please don’t hear us saying that companies who have done this a short time are “bad”. They might be the very best as they have no legacy of older policies that may have been improperly priced. Or it might mean they are idiots and don’t know what they are doing. Just ask the question and listen to the answer. It will help you know what you are looking at.
What is their rate raise history. You may not find a company with no rate raises in their past in the traditional line of insurance. It is possible in hybrids still to find that. However, you need to know if the company you are considering has been rate stable or rate instable over their years of doing this type of product.
I have sticker shock. How can anyone afford this?
Answer: Not everyone can.
THOSE WHO SHOULD NOT BUY: There are many people in the USA who do not have the required income or assets to justify purchasing this type of product. People with assets less than 50K and/or income in retirement less than 30K are not good candidates for this product. These people will qualify for Medicaid (welfare) very quickly. For them, investing in a long term care policy may only make sense if it is very small and designed to pay for some choice of care for a short window of time.
THOSE WHO SHOULD SHOP: If you meet or exceed the income of 30K in retirement and over 50K in assets (not counting your home), then you should shop. You may still not choose to buy, but you should at least look. Further, if you do opt to buy, the premium ought to be less than 7% of income if you are paying this out of income. Do the math on your retirement income if you can. That is when you are most likely to be on a fixed budget and need to be sure you can afford to keep the policy.
Finally: if you can’t afford the premium, how will you ever afford the cost of care?!?! The premium is always pennies on the dollar compared to paying for care out of pocket.
Do I even need a policy?
Answer: no one can answer that but you because no one can foresee the future with accuracy.
~ SELF INSURE: If you can fully self insure the risk, then maybe consider not buying. If you do have care, your family will be shocked at how much you are hemorrhaging each month to pay for care – in fact they may even be sick at their stomachs as they write the check each month. But if you did the math (and are accurate) then you know you have the resources and hey, that was what you saved the money for anyway, right? If you have no idea how to do the math on this, speak to an agent who specializes in this. They can help you know the cost of care, assess your risk, and help you do the math. Further, they can help you answer the oh-so-important question of “if one spouse goes into care, will there be enough for the surviving spouse to have quality of life”?
~ PARTIAL COVERAGE: Most people can get by with partial coverage. It lets your premium be less and also recognizes that you will bear at least part of the cost of care.
~ FULL COVERAGE: Now and then it will make sense to buy 100% coverage for your risk. This is where speaking to another agent may net you a different logic that allows the premium to be more affordable and yet still takes the sting out of the cost of care.