Frequently Asked Questions
The subject of Long Term Care and LTC Insurance is getting more attention with the critical need for planning due to longer life expectancies, changing family dynamics, and lack of government resources.
What is Long Term Care Insurance? Why is it important to have this protection in place?
Imagine that you are 80, 85, 90… you want to protect your independence and your family’s well-being. LTC Insurance picks up where medical insurance leaves off… when skilled care can no longer help an acute condition. Long term care is the largest unfunded risk to a clients’ nest egg, retirement, and independence. Therefore, it is extremely important for people to plan for long term care while they are healthy and insurable.
What is long term care?
Long term care refers to assistance that a person with an illness or condition needs to get throughout the day. The need for care is caused by a physical or cognitive impairment.
How does LTC insurance work?
It is a tax-free pool of money, portable and comprehensive, that provides for care in any setting through either cash, reimbursement, or both. It is an independent resource that pays for costs associated with home care, community care, assisted living, or nursing home care. Additionally, it pays for home modifications, hospice care, bed reservations, and caregiver training. This separate pool of money allows you to keep your lifestyle and independence and protect your family’s well-being.
How have family dynamics changed and made long term care planning more important?
Most adult children do not live nearby, have busy lives of their own, or may even be widowed or aging themselves, so family caregiving may be unrealistic. Eighty percent of care is given at home, but that too, costs money. If you want to maintain your home and other family commitments, you need to plan.
Having a separate pool of money for care allows for independence and dignity of care and lessens the emotional, physical, and financial consequences to loved ones when a person needs care. It allows you to have choices of care setting and types of care.
What is the statistical average time someone would need long term care?
3.2 years is the average need for long term care. Alzheimer’s patients typically need it for 5-7 years. Women are most vulnerable to LTC needs given they live longer and are likely to be living alone in later years. Women NEED to take an active role in this planning, as they may ultimately be caregivers to their spouses. 70% of individuals over age 65 will require some type of long term care in their lifetime, with 80% of individuals over age 80 requiring it.
What are the approximate annual costs of long term care now?
Click here to view the most recent annual cost of long term care.
What about government programs?
Medicaid will not be a robust option in the coming years. Medicaid is for those who cannot qualify or cannot afford private insurance or for those in “crisis mode.” It does not provide for choice of care nor does it have standard triggers for care like Long Term Care Insurance.
Clients who desire freedom and independence are choosing to have a private pool of money instead of the uncertainty of limited government options.
What if one has the resources to self-insure?
Self-insurance will always cost more given tax consequences and opportunity costs of using your assets and redirecting income stream. The tax incentives further enhance the efficiency of shifting the likely future care cost to the insurance company.
When is the best age to buy Long Term Care Insurance?
As young as possible for those with family health history, as soon as possible for most others. There is no advantage in waiting, given the higher risk with age and health conditions, resulting in higher premiums or ineligibility. Even with no health changes, premiums are based on age at time of application. In addition, carriers are refreshing plans more frequently for new applicants, resulting in higher premiums.
How much does Long Term Care Insurance cost?
There is no one answer. There are wide ranges in premiums and coverage. We customize a plan to fit your budget. Keep in mind that the amount paid in premiums over a lifetime will always end up being a small fraction of the cost of care. To put this in context, the average client will fall in the range of his or her monthly cable or mobile phone bill. Some higher plans will cost more–closer to a few dinners out per month.
How are policies priced?
Policies are priced based on age, health, gender, marital status, medical conditions, and state of residence. Once the factors are taken into consideration, all the variables of a plan can be customized for your budget. No one size fits all. Your base rate is maintained for the life of the policy; carriers cannot raise rates on individuals and must get state approval for rate changes. You are protected by the State’s Department of Insurance.
Will my premiums stay the same?
The Department of insurance in each state has strict rules for rate increases. An issuer can only raise rates for policyholders within a class of insureds—no individual can be singled out for a rate increase. Today’s generation of policies has stricter underwriting criteria and is priced to reflect claims data and a lower interest rate environment.
What are State Partnership Plans?
State Partnership Plans are a combination of Long Term Care Insurance and Medicaid Extended Benefits. Click here to learn more.
How has Long Term Care Insurance become more consumer friendly?
LTC Insurance is a more regulated and insurance–friendly product today. Policies are more flexible and allow you to receive care in virtually any setting.
Since 1996, Federal law regulated that changes include: no hospital stay or skilled care required before LTC triggers; cognitive impairment like Alzheimer’s is covered; all policies are guaranteed renewable (cannot be cancelled at any time); policy triggers are clearly spelled out so there is no ambiguity about getting paid; there are national insurance guidelines and upfront underwriting so there is no post-claims ambiguity.
How are LTC Insurance benefits paid? When can I use a policy?
The 1996 HIPAA laws created federal standard triggers to start your benefits—once your doctor states that you need help with two out of six activities of daily living (dressing, transferring, bathing, eating, continence, or toileting) or supervision for cognitive impairment, your benefits will pay for care.
What are my options when purchasing a policy?
There are many LTC plan designs, including Traditional Long Term Care Insurance, State Partnership Plans, Life-LTC hybrid plans, Life with LTC riders, annuities with LTC, and SPIAs to fund LTC. There are plan designs to best fit needs, budget, lifestyle, and, most importantly, health conditions.
There are different chassis: Traditional, Partnership, Linked Asset Based, Life/LTC, Life Insurance with an LTC Rider.
It is important for clients to look at all their options. Working with independent advisors who are familiar with ALL PLANS AND ALL DESIGNS gives you the best outcomes. As independent brokers, our firm reviews ALL OPTIONS given health consideration before recommending solutions. Click here to learn more.
Traditional stand-alone products have bigger leverage for premium dollars, and inflation protection is immediate. There is no death benefit (unless you add a rider), and the breakeven point is very low. For example: If you paid $4,000 a year for an LTC premium for 20 years or $80,000 paid in premiums, you will have a breakeven point of 3-6 months of care. Tax incentives are in place from the state and federal government.
Linked Benefit or Hybrid Solutions are an ideal repositioning tool for dormant cash. These plans provide for an immediate pool of money for Long Term Care Insurance AND Life Insurance. It is important to note that in New York State (NYS), there is no inflation protection for the first two years of claim benefit. Although you might have a large pool of money with hybrid, the out-of-pocket costs for the first 24 months require you to possibly co-insure.
Are there tax incentives for my policy premiums?
Yes. State credit and federal deductions for stand–alone policies only. Tax advantages include a NYS tax credit of 20% and age-banded federal deductions for business owners and those who itemize medical expenses. Tax incentives are available only on stand–alone policies, not hybrid life products. Click here for additional tax resources.
How do carriers underwrite?
LTC insurance is underwritten for morbidity, not mortality. Underwriters are getting stricter. You must apply when you are relatively healthy or have a health condition that is stabilized. Certain conditions are uninsurable, and many have waiting periods. Every carrier has “sweet spots.” It is important to evaluate all options in advance of an application and have a thorough and confidential discussion to prequalify for health.
What else is new with LTC Protection?
Today’s consumers are younger and healthier. Their average age is 56 and continues to drop. Women’s premiums have increased with gender-based pricing. With gender-neutral rates still available in select states, women can benefit with current generation pricing and “lock in” these lower rates. Family medical history is now being considered in the underwriting, and parameds are the new trend. Today’s carriers are leaders in the industry, committed to the market. The LTC industry is responding to the demands of the 21st Century consumer, and longevity risk.
At the end of the day, it is about family protection and independence. With a separate pool of money that is growing for future care needs, your planning makes the consequences of care less emotional and easier to facilitate. It avoids financial distress for a spouse and grown children and allows for independence and choice of care.