Younger Is Better When You Want Affordable Long-Term Care Insurance Coverage

The problem with long-term health care and how to afford it is now top-of-mind for most American families. Today, many families have experienced a loved one who needed extended care either in their home (provided by family or professional) or required facility care.

Unpaid and usually untrained family caregivers provide a tremendous amount of care, usually due to a crisis from lack of planning. In fact, according to a recent study, there are 53 million unpaid caregivers today in the United States alone Unpaid Family Caregivers Now Total 53 Million People | LTC News.

Health insurance and Medicare (including supplements) pay little for long-term care. Medicaid will pay for long-term care but only if you have little or no income and assets. Long-Term Care Insurance is paying benefits. In 2020 the top insurance companies paid over $11.6 Billion in long-term care benefits. 

Many Understand Need to Plan but Have Failed to Plan

Most surveys show that Americans understand the potential need for long-term care. Yet, they have typically not planned for, much less done anything about, future care costs and the consequences long-term care will have on their family and finances. 

There is a perception that Long-Term Care Insurance is too expensive. The question is - how much is Long-Term Care Insurance?

That is a loaded question, according to experts. It also depends on who you ask. An LTC NEWS survey of financial advisors showed that 68% of those who responded say Long-Term Care Insurance is too expensive. Only twenty-seven percent of those who called themselves 'Long-Term Care Insurance specialists' indicated it was too expensive.

Who is right?

Gruenwald said that once he has a meaningful conversation, they become better informed and see for themselves that a good plan is often very affordable.

Cassandra Watson, a specialist who runs NextGen Long-Term Care Planning agrees.

"My clients do not feel that LTC Insurance is prohibitively expensive, and they are often relieved when viewing initial policy designs," Watson explained.

LTC Insurance is Custom Designed

Part of the issue is Long-Term Care Insurance is custom designed. Specialists tend to understand actual use at the time of claim and design plans accordingly. However, many financial advisors look at nursing home costs which are very expensive; however, most long-term care is no longer delivered in a nursing home. 

"I'm surprised to see so many specialists saying Long-Term Care Insurance is too expensive! A true specialist should know enough to be able to recommend a policy that is affordable and effective. A big part of that is taking the time to get a clear picture of someone's health, wealth, and goals before making recommendations," said Watson.

Policy design is one consideration, but the company an individual is considering is another consideration. Premiums can vary over 100% between insurance companies for the same benefits. 

Younger Buyers – Better Health – Lower Premiums

Premiums are based, in part, on a person's age, health, family history, and the total amount of benefits being purchased. Today more Americans are purchasing Long-Term Care Insurance in their 50s.

"I find there's a true shift in the ages of our applicants. As little as five years ago, there were more people in their 60s than in their 50s. Now we see a reversal, and there are more applicants in their 50s. We're even seeing people take the time to plan for LTC in their very early 50s and 40s, especially if a personal experience with long-term care has jolted them," Watson explained.

Gruenwald says that younger buyers are much more aware of the need to address long-term health care than consumers 15 years ago.

"With COVID in the news and the unfortunate number of deaths in nursing homes over the last 18 months, they have become more sensitive and realistic about planning," Gruenwald added.

Many financial advisors only have one, sometimes two options to choose from, but a specialist typically has many more. However, there are 'specialists' that only work with one insurance company as well.

Several Types of LTC Insurance Available

There are several types of policies that are available. Traditional Long-Term Care Insurance still represents the majority of applications. However, many people turn to asset-based or 'hybrid' policies that combine life insurance or an annuity with a rider for long-term health care. 

Some consumers and advisors like that the policyholder will get a death benefit or long-term care benefits when they own a hybrid policy. But - premiums are higher and often are paid with one single premium or over a period of 10 years. 

"I ask them: do you prefer to rent or own your coverage? The traditional plans are like renting - you have coverage, rent, the premiums might go up periodically. It costs more to buy a house, the hybrid, but you and your family will have something to show for it down the road," Gruenwald said.

However, hybrid policies do not qualify for the Long-Term Care Partnership Program, in which 45 states participate in offering dollar-for-dollar asset protection - What is a Long-Term Care Partnership Policy? | LTC News.

Oh, then there are life insurance policies that offer a chronic illness rider, but these plans do not meet the federal definition of long-term care. While less expensive, they often provide smaller benefits or are more restrictive on how you get the 'long-term care benefit.' 

Real ‘hybrid’ plans follow the guidelines under federal law for Long-Term Care Insurance (U.S. Tax Code Section 7702B)

Are you confused yet? Probably. In many states, limited duration or 'short-term' policies also are available. 

So - how much does it cost?

There is no single cost. There is no single policy design. Premiums are based on several factors, which include:

• Age
• Health
• Marital/Partnership status
• Family History
• Benefit Options

Benefit options include the monthly or daily benefit amount, the initial size of the benefit account or pool, inflation benefit, shared spousal rider, and more. 

Again - How Much Does It Cost?

Let's use a North Carolina couple, male age 56 and female age 53. They qualify for good health discounts with all companies. They want the following benefits:

• $3000 a month (or $100 a day)
• Three-year benefit pool starting at $109,500 each.
• 3% compound inflation benefits increasing benefits - not premiums every year
• Shared spousal benefits rider
• 90-day elimination period (deductible based on days - not dollars)
• Partnership certification for North Carolina

The three least expensive A-rated companies were all in the neighborhood of $3100 a year (total for both spouses). Other companies were over $4000 a year.

More benefits mean higher costs. Hybrid policies are much more expensive - but you also get a death benefit. There are ways to reduce the cost of any plan by reducing benefits.

Single men pay much less than single women since women live longer and thrive in a care environment longer than men do. A single 56-year-old male, for example, with the same benefits, would only pay around $1200 a year.

There are many companies to choose from - Top Options for Long-Term Care Insurance in 2021 | LTC News

Good Health Today is Essential for Planning

Experts remind us that it is your good health today that allows you to address the costs and burdens of changing health and aging. 

So how much does it cost? Perhaps the other way to consider this question is to ask, how much will long-term care cost when I need care in the future?

Your health insurance, including Medicare and supplements, will only pay a fraction of these future costs. Without Long-Term Care Insurance, you will either fund these expenses from your income and assets, or your family will provide the care - or perhaps a combination of both.

Self-Funding Future Care? Family Caregivers?

Can you self-fund your future long-term care costs? We know the cost of care is expensive, but we do not know when you will need care, in what setting, and for how long. You also have no ability to ‘time the markets.’ You might need care when the markets are down forcing you to sell assets at a loss.

Start with the cost of care - Cost of Care Calculator - Choose Your State | LTC News. The costs vary depending on location. 

Let's say you are 55 years old and live in the Detroit, Michigan metro area. In 25 years, in-home care, based on a 44-hour week, will average about $10,600 a month - if you need two and half years of in-home care, that will run $318,000. Then you move into assisted living for just one year at a base cost of $126,710. We do not know the surcharges you may have based on your needs, but let's say it is an extra $500 a month. That brings the total assisted living charge to $132,710. Add that amount to the in-home costs and you have a grand total of $450,710 of out-of-pocket expenses.

Self-funding is expensive. What about your family? Can your adult children become your future caregiver? No easily.

Family members are untrained and unprepared for the role of being a caregiver. Being able to juggle a career and other family responsibilities with the role of being a caregiver is a tough ask. Being a caregiver is physically and emotionally demanding. 

Wait Until You Get Old to Plan?

Some suggest just waiting to purchase Long-Term Care Insurance until you get older. One famous radio host tells his listeners to wait to age 60; however, that would cost you more money since the premium would be calculated on the older age. There is even a bigger concern about waiting until you are older to address the costs and burdens of aging - your health. 

Long-Term Care Insurance is medically underwritten. Adverse health problems can make your policy more expensive or even prevent you from obtaining coverage in the first place. 

"Individuals who want Long-Term Care Insurance protection must health qualify, and our health generally gets worse as we get older," said Jesse Slome, President of the American Association for Long-Term Care Insurance.

The older you are, the more likely you may get declined for coverage - Waiting On Long Term Care Insurance Can Lead to Decline | LTC News.

Long-Term Care Insurance can be very affordable, especially if you purchase a policy in your 40s or 50s, enjoy relatively good health, and find the right company and the proper policy design. Generally, most financial advisors and insurance agents lack the experience and skills to help you in this area. Long-Term Care Insurance specialists who represent the top companies will help you find affordable coverage.

However, not all specialists are indeed specialists Financial Advisor or Long-Term Care Insurance Specialist | LTC News.

Be proactive in protecting your future retirement and reduce the stress and anxiety otherwise placed on those you love. You might have heard that LTC Insurance is expensive or even unnecessary. Find out the facts before you make a decision that would adversely impact your family and finances.