Long Term Care (LTC) Insurance is an insurance policy that one can purchase that will essentially pay for long term health needs such as if you need a home healthcare worker to assist or take care of you in old age, assisted living facilities or convalescent homes. I've been researching LTC insurance recently as an option to prevent the total decimation of my savings that I hope to bequeath to my children, or even worse, causing my children to pay for long term care were something to happen to me.
From what I've discovered so far, the younger one is when they purchase the policy, the lower the rate they can (sort of) lock into. Age 50's seems to be the optimal purchase time. I've crunched some numbers (based upon me being a smoker, I assumed the high end of the cost) and were I to purchase this year, pay every year, by the time I was 75 I'd have paid about $75,000 for a policy that would pay $150,000 in today's benefit with an annual 5% inflationary increase for future years which would be over $300,000 annual benefit at my 75 years of age.
Does anybody here have experience with LTC insurance? Either for themselves, or for a loved one that purchased it and used it?
I'm a financial advisor and I have to keep licensed in LTC. You're right to look at it, few things can destroy wealth faster than having to pay for long term care.
What do you want to know?
.
[MENTION=34298]Mac1958[/MENTION]
I'm curious about somebody actually collecting the insurance if/when needed. Sometimes, insurance companies can be difficult to collect from. How hard is it to make claims and get them paid?
Suppose I am incapacitated to the point that I can't fill out claims paperwork, how difficult would it be for one of my children to handle the claims process?
Are claims paid directly to the care provider, or to the individual who then pays the care provider? Or, does that depend on the policy?
What kind of rate increases do you anticipate for long term care insurance? $2500 a year right now is affordable, but once I retire and am living off of my retirement investments and SS, I'd hate for that rate to hit something like $10-15k a year if I make it into my 70's or 80's without needing it before then. (Hopefully I'll never need it, but we don't normally purchase insurance because we hope something will happen that allows us to use it)
I mentioned a 5% annual increase in benefit. I got that number from the websites I've been visiting. Honestly, I think costs for long term care will increase more than 5% annually. Is it possible to secure a policy with a higher percentage increase in future benefit?
Some insurance companies that provided LTC have stopped adding new customers. Do you think that will be a continuing trend as the baby boomers age?
Thanks in advance for your assistance.
First, a physician needs to verify to the insurance company that you cannot perform 2 ADL's (Activities of Daily Living): Bathing, eating, dressing, transferring (like from wheelchair to bed), continence, toileting. That's the trigger that makes you eligible, and doctors are all well aware of how that works. Now, to be sure, the insurance company is gonna verify that this is true before they start paying, and all paperwork has to pretty much be perfect. But they do pay.
You definitely want to alert your children about the policy. It's no tougher for them to get the claims done. Many people who are 60+ also put important information like that on their fridges.
Yes, the method of payment of benefit will depend upon the plan and the insurer, so be sure that's one of your questions when talking with an insurance broker so you know what to expect.
Rate increases can be a real *****. If you're paying $2500 a year, don't be surprised to see them go up 15%. So you want to go with an insurer with a decent track record of rate increases. It might be worth a few more dollars up front to go with one who won't cram big increases down your throat later.
Another option is a "limited pay" policy, wherein you just make payments for 7 or 10 years. Yes, they will be higher, but cheaper in the long run, and you're less likely to be whipped around by rate increases.
I'm not aware of any inflation riders that are higher than 5% compounded. You'll find that such a rider adds a ton to the premium, but you pretty much have to have it.
That last question is a good one. Some insurers have gotten out of the LTC space, but if they do they are still committed to the contract. I could go on forever on this. All in all, I think LTC has now been around long enough to have it pegged a little better in terms of actuarial guesses.
Two more things:
Make sure you speak with a broker who handles many companies, and make sure that Genworth and Mutual of Omaha are included, their plans are good and their premiums are usually the best or close to it, at least where I live.
Also, there's now a couple of companies that I know of (maybe more) that are offering "living benefits" with their term life insurance, the cheapest kind of life insurance. TransAmerica is one, AGLA (American General) is another. This means that if you experience a chronic illness, critical illness or terminal illness you can literally access some of the face value of the policy. They just write you a check for you to use as needed. It's also triggered by the 2 ADL's mentioned above. I think AGLA has a permanent policy that does the same thing.
Let me know if you have any other questions.
.
