Many people today understand the need to plan for long-term health care. We see family members getting older and spending their savings on care either in their own home or in a facility. For many families it means being a caregiver. This usually falls on a daughter or daughter-in-law and the burdens are tremendous as they must deal with being a caregiver and balancing that with a career and other family responsibilities.
Then we read stories that question either the need for Long-Term Care Insurance or the ability of the policies to affordability provide the benefits we need to protect retirement accounts, lifestyles and ease family burdens placed on them by long-term care.
No question, we live in an aging society. Longevity has become a major factor in retirement planning. Financial advisors want to make sure you never run out of money. Yet, we see many older people with financial problems and much of that comes from the financial costs and burdens of aging.
What about Long-Term Care Insurance. Is it true that these policies are expensive? Is it true they are having numerous rate increases? Do these policies even work?
Long-Term Care Insurance works. In 2017 the American Association for Long-Term Care Insurance (AALTCI) says the industry paid over $9.2 Billion in benefits to American families. This is money that would have otherwise would have been paid out of private savings or by the taxpayer through the Medicaid program. Medicaid will only pay if you have little or no assets.
Jesse Slome is the executive director of the AALTCI. He said, “Without insurance to pay some or all of the cost, the caregiving responsibility often falls on elderly spouses or adult children caring for their aging parents.”
“Long-Term Care insurance provides more than just money,” Slome adds. “It’s as much about having control and choices, while protecting your retirement plans and lifestyle.”
What about price increases? You may have read stories about rate increases and some of them being substantial. Experts say this is on what is called “legacy business”. These are old policies sold years ago prior to the new rate stability rules which are now in place.
This old business was never priced to consider the interest rate crash. It also never considered the fact that few people ever drop these policies. In addition, underwriting (how they determine who they will sell a policy to do based on existing health conditions) is much more conservative and scientific today than in the past.
In an article in Broker World Magazine, industry leaders Marc Glickman & Scott Olson wrote that both the likelihood and magnitude of possible future rate increases are under control.
They write that the pricing of Long-Term Care insurance policies sold today is more conservative across every major pricing assumption. This includes interest rate assumptions, underwriting and lapse rates.
They also explain how the National Association of Insurance Commissioners passed the Rate Stabilization Model Act in 2001 and 41 states have adopted a variation of this Act. Companies are required to price more conservatively and are penalized should a rate increase be needed. The direct result is more conservative pricing across the industry to help protect consumers from large future rate increases.
You can read the full article here: http://www.brokerworldmag.com/articles/articles.php?articleid=4186
OK, so the pricing is much more conservative, does that mean it is expensive? The answer is no. Long-Term Care Insurance remains very affordable for most people.
“People are usually pleasantly surprised when they see how low the premium is when I speak with them,” said Mary Ann DeKing, one of the leading experts on Long-Term Care Insurance in the country.
“These policies are very affordable especially if you are in good health. A good majority of people who purchase these policies are in their 50s. These are great plans at great value. This way people can not only protect their retirement funds but add a great deal of peace-of-mind knowing their adult children will not have the burden of caregiving,” she explained.
A survey of a handful of top specialists nationwide shows an average premium at all ages in 2017 of $163.10 a month. Much lower for those under 60 many under $125 a month some even under $100 a month. Premiums are based on age at application, amount of benefits being applied for and a person’s health. Those who live in states where the cost of care is more expensive tend to buy bigger benefits than those who live in lower cost states.
Most states also have Partnership Policies available which provide additional asset protection. Tax incentives are also available for some people. Find your state, the cost of care and available tax incentives and partnership availability here: https://www.ltcnews.com/resources/state-information