How to Shop for Long Term Care Insurance One of the biggest challenges someone faces in their life is whether or not there will be a time when they will not be able to take care of themselves. We need help in the first few years of life and often for the last few years of life. As infants we had adults take care of us, but when we are adults (or adolescents) and need assistance who is there to help us and how do we pay for it? Health insurance and Medicare only cover medically necessary care and only as long as you are getting better. For example if you have an accident or a change of health like a stroke and can't get out of bed yourself or walk, you would be treated until your condition stabilized and then you would be released. If you still couldn't do those things you would either have to go to a facility where the staff will take care of you or return home where your family would take care of you or hire help. Health insurance, Medicare, and Medicaid do not provide much for home care, assisted living care, custodial care, they primarily cover nursing home care. Where do you want to receive care? During the treatment and recovery process your health insurance and Medicare pay for about 100 days total or as long as you are improving and also you pay a deductible that starts after day 20. After health insurance and Medicare stop paying you either pay yourself or apply for Medicaid, unless you have long term care insurance. Medicaid is welfare health care and to qualify for Medicaid you may have to 'spend down' your savings to qualify. Now you know the health care scenario. If you are considering long term care insurance you need to know how to buy it. Copyright © 2009 GuideToLongTermCare.com All Rights Reserved First, choose a company with strong financial history. Next you need to choose a plan. Most companies offer similar plans for similar costs because their risk and costs will be similar (like a Nissan Maxima vs Toyota Camry cost the companies about the same to manufacture and sell). Long term care insurance premiums are primarily based on 1) your age, 2) the daily or monthly benefit, and 3) how long the benefits pay for. Some other factors are health rating, elimination period (waiting period before benefits start), and inflation protection. If you are reasonably healthy you can pick your own plan benefits. You know your age and can find out what it cost in your area for care (http://guidetolongtermcare.com/whatcost.html), but what you don't know is how long you'll need to pay for care. Some tips for deciding on how long your coverage should be are: 1) your health over the last 10 years, 2) your family health history (Alzheimer's, longevity, cancer, heart disease), 3) statistics (average LTC insurance claim is 3 years, average time in nursing home: 875 days) and 4) the affordability of the LTCI premium. If you have Alzheimer's in your family you may need 4 years or more of care but if you have cancer in your family you may only need a year or two. Some people insure for the total risk, depending on where they live they choose between a $4000-$10,000 a month benefit and for 2 years up to unlimited (lifetime), but most people insure somewhere in the middle. If care cost you $6,000 a month and you can afford $1,000-2,000 a month out of pocket you can get a policy for $4,000-$5,000 per month benefit. Remember your LTC insurance benefits are tax free but where you get the out of pocket money may not be. Copyright © 2009 GuideToLongTermCare.com All Rights Reserved The national average cost for care is $72,000 and rising every year. For two years of care you'll spend $144,000. For a $144,000 insurance policy ($160/day 36-month) a 60 year old might pay with no discounts $3,000 for an annual premium. If they paid in for 15 years before they needed care and put in a claim they'd pay in $45,000. The average time in a nursing home is 29 months. At $6,000 per month they'd break even at 7.5 months of care. If they paid in for 20 years they'd break even in 10 months. So their insurance bought them 21.5 or 19 months of care more than if they paid themselves. (at $6,000 per month $129,000, $114,000). This example does not calculate benefit increases which would be at 5% compound $144,000 in 15 years increases to $289,000 an in 20 years to $368,000. So you look at the factors and decide on a $5,000 per month benefit 36 month plan and find out that with company A it will cost $3,000 per year which includes compound inflation protection, no waiting period for home care (where most care first occurs), survivorship (if after X years a spouse dies surviving spouse gets a free policy). Company B has the same but with a 90 day home care waiting (elimination) period for $2,700 a year. Which one do you pick? Consider that if care cost you $150 per day and you pay the first 90 days with company B, you'll pay $13,500 before they start paying. You would have to pay premiums for 22.5 years to end up paying the same as with company A ($13,500/$600=22.5). Maybe you're willing to take that risk for a lower premium, but what if you needed care next year because of an accident or health change and needed care for only a year before you recovered? You'd have paid the $13,500 in the first 90 days of care, the insurance would cover the remaining 9 months. Copyright © 2009 GuideToLongTermCare.com All Rights Reserved Discounts: Some companies have a 10-15% preferred health discount, this is determined during underwriting. Some companies offer a "couples discount" to any two people of the same generation that share expenses. Some companies have a multi-life discount for groups and small businesses --if 3 people sign up within a 90 day period they get an additional 5% discount. Watch out or at least don't plan for discounts that are contingent on both partners being approved, etc. When considering how much inflation protection you need you also need to consider your age, health and family health history . If you are under 70 you should consider compound inflation protection because it doubles your benefit in about 14.5 years. If you are over 70-75 then consider simple inflation protection, it has a lower premium since it's less likely you'll enjoy the 14.5 year doubling, and for ages over 75 consider simple or no inflation protection. So you now may know enough to see if you pre-qualify and to get a quote. To be safe you can request a quote for a $200/day or $6,000/month 36 month plan, with inflation protection based on your age (above), zero elimination period for home care, 100% benefits for home and assisted living/residential care benefits. This "average" policy premium quote will give you an idea of whether or not you can afford long term care insurance or if you should make other plans. Some people plan on spending some of their own money, giving away the rest, including their assets and going on Medicaid. With the Deficit Reduction Act most states Medicaid can look back 50 months to see if you've transferred any assets out of your name and Medicaid can take action if you have done so. Estate recovery is the process where Medicaid is reimbursed by your estate for the expenses you've incurred during your long term care while receiving Medicaid benefits. Copyright © 2009 GuideToLongTermCare.com All Rights Reserved Are you ready to get a long term care insurance premium quote? You can easily get a quote online and follow-up underwriting applications from the top insurers can also be obtained at these websites: http://guidetolongtermcare.com http://howtobuyltcinsurance.com After you get a quote and you decide you can afford the insurance the next step is to see if you health qualify also called underwriting approval. This process is not done online because states require you sign a form to release your medical records in a way to protect your privacy (HIPPA). The underwriter needs the records so they can determine if you are insurable, and what health rate you qualify for. Don't worry there are plenty of privacy laws in place to protect your health information and you are not yet obligated to buying until you have been approved and receive the policy. There is a 30-day free look from the time you receive the policy to keep it, change it, or cancel it. From the time you apply for underwriting you have a couple of months to "think about it." The caveat is that your health changes and you become either uninsurable or drop to a more costly health rate. To avoid this risk you should apply for underwriting approval a month before your health changes. Changing your plan once you are insured: some companies have a window of time that they will allow you to increase your benefits without new underwriting, usually about 30 days. As a rule you can always decrease benefits to lower your premium. -----Sign up for our free newsletter: news@guidetolongtermcare.com Copyright © 2009 GuideToLongTermCare.com All Rights Reserved