A New Approach to Funding Long-Term Care

A New Approach to Funding Long-Term Care

Today, people are living longer than ever. Whether it’s due to increased health consciousness or ongoing medical advances, the reality is that life expectancies continue to extend. This means that we can enthusiastically and energetically enjoy our retirement—often several decades’ worth.

Maintaining financial solvency for this extended life span is an increasing challenge, especially if constant or prolonged care is required. Statistics indicate that more than half of all people who reach age 85 need some form of care. This would suggest that if a married couple lives into their mid-80’s one spouse or the other will most likely require care.

This care does not come cheaply. Today, long-term care—that which is associated with the activities of daily living such as eating, bathing, and dressing, or the supervision of someone with Alzheimer’s—can easily climb over $70,000 per year. One common misconception many clients have is that Medicare will cover this cost. It does not. Medicaid may cover such costs, but recipients must meet strict income eligibility criteria and are restricted to Medicaid-approved services and facilities. Funding long-term care with savings alone can quickly deplete retirement assets.

Long-Term Care insurance

Retirement dreams and a lifetime of savings could be significantly eroded when financing long-term care. Protecting retirement funds is one of the foremost benefits of long-term care insurance (LTCi). But this type of protection can be cost prohibitive.

Usually, the younger your client is when the purchase a policy, the lower the monthly premium payment is. But even if they buy LTCi 25 years before they need it, the coverage can be costly. Since no on can predict for certain if they will ever need daily assistance, you may find many clients shy away from buying LTCi policies, fearing they might pay in for decades and never actually put their coverage to work for them. In a recent survey, nearly six out of 10 participants said that prohibitive cost was a major reason shy they did not have a long-term care policy. Unfortunately, with a stand-along LTCi policy, if you don’t use it, you lose it.

LTCi Alternative

To meet the increasing demand for long-term care funding and to circumvent the hesitation caused by “use-it-or-lose-it” stand-along LTCi policies, a few life insurers not offer riders that attach to permanent life insurance contracts. These riders—typically called long-term care or “living care” riders—accelerate the policy’s death benefit, creating funds to pay qualified long-term care expenses resulting from chronic illness. In essence, the rider affords the policyholder a safety net should they ever need care, without the price tag of a traditional LTCi policy.

How it works

The concept is simple and practical. Your client chooses the face amount of life insurance they need when they apply for a permanent policy. At this time, they also choose a maximum monthly amount for long-term care benefits—usually up to a maximum of 3 percent of the policy face amount. If, at some point in the future, they begin collecting long-term care benefits, each payment reduces their policy’s death benefit. If, however, they never collect long-term care benefits, their policy’s death benefit is not reduced. If they only use part of the death benefit, the remainder passes to their beneficiaries at the time of the policyholder’s death.The cost of long-term care is already high, but it is going to get even higher. As the baby boomers age, total spending on full-service care is expected to more than triple over the next 25 years. Helping your clients ensure they have a funding option in place—just in case—may be the difference between their financial independence and poverty.

Long-term care riders for chronic illness that are attached to a permanent life insurance policy allow a single policy to potentially meet two protection needs. The policyholder pays a fee for the ability to accelerate their death benefit, but it can be far less than the cost of stand-alone LTCi premiums that may go to waste if they never need care. It is important to note that the face amount accelerated for LTC expenses is not available upon the death of the insured. These riders may not cover all cost associated with long-term care, but they will help lessen the financial burden, helping to protect retirement funds and lifestyle.

For your clients who are concerned about possibly needing future long-term care for themselves, their parents, or a spouse, a permanent life insurance policy plus a long-term care rider may offer an affordable strategy.

For more information visit: http://www.LongTermCareInsurancePros.com
Or Call 949-854-3001 or 1-866-GO-4-LTCi (Toll Free)

LTC Quiz: What is your Long-Term Care IQ?

Dane A. Petchul License # OE 49 145

LTC Quiz: What is your Long-Term Care IQ?

How well do you understand the issues regarding long term care?

This short quiz will clear up some common misconceptions.

1. Most long term care is provided in a nursing home.  True  False

2. The average length of stay in a nursing home is more than five years.

 True  False

3. Nursing home expenses for Alzheimer's disease patients are covered by Medicare.

 True  False

4. By shopping around or calling the company directly, you can save money on your Long-Term care insurance premium.  True  False

5. On average, a one-year stay in a nursing home costs about $35,000.  True  False

6. People have to spend all or almost all of their assets to receive Medicaid benefits.

 True  False

7. Nearly 40% of the long term care population is under the age of 65.  True  False

8. Medicare is the primary funding source for most long term costs.

 True  False

9. Disability insurance and long term care insurance cover the same type of expenses.

 True  False

10. Currently, more than 6 million people aged 65 or older need long term care.

 True  False

11. Most people overestimate the cost of long term care insurance.

 True  False

Look below for the correct answers.

__________________________________________________________

Answers:

1. The correct answer is False

88% of people who need long term care receive care at home or in a community based setting such as an adult day care center. 12% receive care in a nursing home or other institutional facilities.

2. The correct answer is False

Most nursing home stays are short, recuperative stays. 10% of the total nursing home population faces a stay of five years or more.

3. The correct answer is False

Medicare provides few benefits for long term care services needed by most people with Alzheimer's disease. Medicare provides reimbursement for skilled nursing home care. Medicare pays nothing if the individual requires only custodial care.

4. The correct answer is False

The state regulates the pricing on all insurance plans. The same plan will cost you the same from any agent or company.

5. The correct answer is False

On average, a one-year stay in a nursing home costs about $75,000. This figure can be as high as $110,000 in some regions.

6. The correct answer is True

People have to spend all or almost all of their assets to get Medicaid benefits.

7. The correct answer is True

40% of the people receiving long term care are working-age adults aged 18-65.

8. The correct answer is False

Medicare paid for only 18% of the spending in 1998.

9. The correct answer is False

Disability insurance will not cover most long term care.

10. The correct answer is True

And in fact after the age of 85, half of us will need help with ordinary activities of daily living (like bathing, dressing and eating).

11. The correct answer is True

According to a recent survey, those that do not own long term care insurance overestimated its cost by an average of 50%.