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Today’s seniors are living
longer than ever, but as life spans increase, so do the needs for
additional care. The majority of today’s retirees will need some
form of special care as they age, whether that help is delivered in
their own residence, in an assisted living facility or at a nursing
home. The cost of such care is skyrocketing and many find they are
unable to afford it.
Our recent series of articles has discussed this situation in great
detail, exposing the gap that exists between what seniors need and
what government programs actually provide. The best way, by far, to
fill this gap is with Long Term Care Insurance.
Long Term Care Insurance (LTCi) is an insurance policy that covers
your care when you can no longer perform at least two of six daily
functions. These ‘activities of daily living’ are bathing, dressing,
eating, toilet use, urine and bowel continence, and getting in and
out of a bed or chair.
Each LTCi policy works a little differently. Some require you to
cover the first 90 days of care before coverage begins, while others
waive that waiting period if the need is for in-home care. Some pay
so much per day, while others pay actual expenses up to a certain
amount. Some have care coordinators that arrange for all the care,
so you don’t see the bills or have to handle any paperwork.
Anyone seeking to purchase LTCi has to medically qualify. The
underwriters look at your health differently than if you were
applying for life insurance. LTCi underwriters are more concerned
about illnesses and diseases that are likely to keep you from caring
for yourself, not those that will cause death. Osteoporosis and
diabetes are examples.
Most companies have preferred rates for those in excellent health,
with normal rates for the rest. LTCi premiums are also based on your
age. That means the longer you wait the higher the premium will be.
There is a two in ten chance of needing long-term care after age 50,
a two in five chance after age 65, and a seven in ten chance after
age 75.
As a result, it is better to buy LTCi sooner as opposed to later.
This should be seen as a pre-retirement purchase. I recommend
strongly considering it around age 50.
There are many factors to consider when choosing a LTCi provider.
Since this coverage is so critical, only do business with insurance
companies rated at least AAA or AA by Standard and Poors. Beware of
companies that have just entered the market. Check how many LTCi
policies they have issued. If they haven’t issued LTCi policies for
at least 10 years and aren’t one of the major players, stay away.
Many companies (including some that are major household names)
entered the business, only to exit it a few years later. Others
don’t have the actuarial experience to properly price policies and
end up raising premiums. Either way the policy holders suffer.
Don’t choose a company that has raised rates on existing policy
holders. Don’t choose a plan that requires you to buy additional
insurance every three years to protect yourself from inflation. It’s
better to have inflation protection automatically built into the
policy.
You get to choose how much coverage to buy. Don’t purchase three
years of coverage just because that’s the length of the average
nursing home stay. This is ridiculous! The majority of people use
LTCi to remain independent, at home, as long as possible. They get
LTCi because they don’t want to go into a nursing home! Get
unlimited coverage if you can afford it.
In my experience, the best Long Term Care insurance is
Genworth Life Insurance Company (formerly General Electric). They are the biggest kid on the block, doing LTCi business since the 1970s. No one that has purchased a policy
from them has ever had a rate increase. It sets the Gold Standard in
the industry.
Don’t try to save a few dollars by going with a questionable
company. This is insurance that could pay back 10-100 times what it
costs you. There’s a 50% chance you will use it. Don’t skimp—what
you save today may cost you much more down the road.
Have a financial question? Send me an email and I’ll personally
respond, free of charge. Go to http://www.guardingyourwealth.com and
click on ‘Ask Jeff’.
In addition to being a nationally syndicated columnist and Certified
Financial Planning Practitioner, Mr. Voudrie provides personal,
private money management services to clients nationwide. |
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