This week’s update features an informative podcast video entitled “Long Term Care Insurance: Time To Have The Discussion.”
Long term care plans are expensive and its costs are rising, Without long term care insurance your wealth can dissipate very quickly as most health insurance plans do not cover long term care and Medicare does not cover custodial care.
In this podcast video, New York City/Connecticut area Chartered Financial Consultant John Darer frames the issues and shares some personal insights on long term care insurance.
The question most frequently asked by consumers contacting the American Association for Long Term Care Insurance is, “will I really need long term care?”
“This is the first generation of Americans who in large numbers are living long lives,” explains Jesse Slome, executive director of the national trade group. “As a result, it really is the first generation exposed in very large numbers to the huge financial and emotional toll resulting from living into your 80s, 90s and even past age 100.”
According to the Association, few individuals can accurately predict how long they will likely live. “They’ll say until age 67 when the reality is that they will likely live to age 87,” Slome explains.
To provide greater access to information to consumers, the Association has added information to it’s Consumer Learning Center with links to leading online life span calculators and long term care quotes. “We urge all adults over the age of 55 to take five minutes to see how long they may live,” Slome urges. “We think many will be surprised though they may then realize they are not prepared.”
According to the long term care insurance trade group, the vast majority of new long term care insurance claims begin after individuals reach the age of 70. “Two thirds of new claims begin after age 80 but you can only purchase long term care insurance when you are still able to medically health qualify,” Slome notes. The organization’s recommended ages to start planning fall between ages 55 and 64.
A 55-year-old couple purchasing long-term care insurance protection can expect to pay $2,700-per-year (combined) for about $340,000 of current benefits which will grow to over $700,000 of combined coverage when the couple turn age 80.
According to the 2012 National Long-Term Care Insurance Price Index published by the American Association for Long-Term Care Insurance (www.AALTCI.org) prices for long-term care insurance policies currently being offered are between six and 17 percent higher than comparable coverage a year ago. “Insurance prices have increased as a result of the historic low interest rates and yields on fixed income investments,” explains Jesse Slome, AALTCI’s executive director. Between 40-and-60 percent of the dollars an insurer accumulates to pay future claims comes from investment returns.
The Association annually analyzes what consumers will pay for the most popular policies offered by 10 leading long term care plans. The study found that the average cost for a 55-year old single individual who qualified for preferred health discounts is $1,720 for between $165,000 and $200,000 of current coverage. In 2011, the same coverage would have cost an average of $1,480 annually.
In addition to across the board increased rates, the Association found that the spread between the lowest cost and the highest cost policy had increased compared to the prior year. “For the 55-year-old single policy applicant the highest price policy cost almost 80 percent more than the lowest priced policy,” Slome noted. “For some categories, the difference was as much as 132 percent and no single company always had the lowest nor the highest rate which is why we stress the importance of comparison shopping.”
The Association study examined prices for single individuals age 55 as well as couples, ages 55, 60 and 65. According to the report, a 60-year old couple purchasing the same level of protection ($340,000) could expect to pay about $3,335 -per-year if both spouses qualified for preferred health discounts. The preferred health discount would save them approximately $500 compared to standard health rates and are a good incentive to act at younger ages, Slome points out. “The available benefit pool for the 60-year-old couple would only grow to about $610,000 when the couple turns 80,” Slome notes. “To have future coverage of $700,000, equal to what the 55-year-old couple would have, they will have to buy a higher, more expensive policy,” Slome explains.
The Association priced policies that included a three percent compound inflation growth factor. “You want the value of the benefit you buy today to grow to keep pace with rising costs,” Slome noted. A policy valued at $170,000 for each policyholder would grow to roughly $300,000 in 20 years. “Married couples have the option of buying policies with a “shared care rider” meaning the combined benefits can be used by either spouse or spouse or split between them.
“For roughly 15-to-25 percent more, instead of having having access to a benefit pool of $350,000, either spouse has access to a combined pool in excess of $700,000,” says Slome. “The ability to purchase a more affordable shorter duration policy but have access to a much larger combined pool of dollars is easy to explain and of great value to the buyer.”
“Over 70 percent of people today buy a 3-to-5 year benefit period,” states Larry Moore, Director of Marketing for American Independent Marketing, a leading national marketer. “When you factor in discounts available to couples, good health discounts and some of the lower-cost inflation options, long-term care insurance can be far more affordable than many people think.”
The complete 2012 Price Index will be published in the Association’s 2012 Long-Term Care Insurance Sourcebook. For more information, visit the American Association for Long-Term Care Insurance’s website at http://www.aaltci.org or call (818) 597-3227.
Inflation protection is the most essential option every policyholder should include in their long term care insurance policy. Why is that so?
It is a type of benefit that increases the daily or monthly benefit amount as well as the maximum benefit amount, also known as the “pool or money” over time to keep pace with inflation and increased cost of long term care expenses. This means that although your benefits are increasing every year, your insurance premium does not automatically increase.
Here are some of the common inflation protection options:
•5% Compound Inflation Protection
•5% Simple or Equal Inflation Protection
•Future Purchase Option or Guaranteed Purchase Option (FPO or GPO)
•Consumer Price Index Inflation Protection (CPI)
•3% Compound Inflation Protection
•4% Compound Inflation Protection
Many experts recommend you contact an LTCi specialist to find out which inflation protection best suits your policy.
In layman’s terms, you should have a long term care insurance that will address the present cost of care. By enhancing your long term care plans with inflation protection, you will be able to deal with your future health care needs, without worrying about its costs.
Every day, over 10 million frail seniors, younger people with disabilities, and their families struggle to find and pay for long-term care to stay independent and remain at home, and the need for care is expected to grow to over 15 million Americans by 2020.
Yet, the issue of long-term care has been completely absent from this year’s presidential campaign. No questions have been asked during the debates. The candidates have not posted any views or positions on their websites, and only two candidates have responded to a national survey on their views to address this growing national challenge.
Long-term care helps older adults and individuals with disabilities manage everyday activities, such as dressing, bathing, using the bathroom, preparing meals, and taking medication.
While these home care services are cost-effective and help people stay independent and out of expensive nursing homes, they are not covered by traditional health insurance. Medicare does not cover them, and only 3% of adults have private long-term care insurance.
Medicaid offers some coverage for long term care, but individuals must spend-down and impoverish themselves to qualify – often exhausting a lifetime of savings. Waiting lists also have doubled over the past decade, with some states cutting home and community-based services to trim budgets.
As a result, over 90% of all long-term services provided today are delivered informally by more than 42.1 million family members. These caregivers often face enormous burdens, adversely affecting their health, ability to work, and financial security.
To help raise this critical issue among the presidential candidates, 15 national aging and disability organizations, including the National Council on Aging (NCOA), invited each candidate to answer five questions about their views on long-term care. The questionnaire was distributed in November to all major candidates for President, regardless of political party affiliation.
So far, only two presidential candidates-Barack Obama and Newt Gingrich-have responded to the questionnaire. The five questions and responses received to date are available at http://www.ncoa.org/LTSSsurvey.
“The number of Americans needing long-term care is expected to double in the coming decade as the population ages,” said James Firman, NCOA president & CEO. “Clearly, this is an issue that cannot be ignored. Voters deserve to hear the candidates engage in a dialogue about an issue so central to the future of our country and the lives of millions of individuals and families.”
The National Council on Aging is a nonprofit service and advocacy organization headquartered in Washington, DC. NCOA’s mission is to improve the lives of millions of older adults, especially those who are vulnerable and disadvantaged. NCOA is a national voice for older Americans and the community organizations that serve them. It brings together nonprofit organizations, businesses, and government to develop creative solutions that improve the lives of all older adults. NCOA works with thousands of organizations across the country to help seniors find jobs and benefits, improve their health, live independently, and remain active in their communities.