Long-Term Care Planning: Fact or Fiction

By: Brian M. Johnson, MBA, CLTC, New York Long-Term Care Brokers

Planning for Extended Health Care is one of the most important planning considerations for retirees.  Long-Term Care Insurance is the one insurance coverage specifically designed to cover the costs of extended health care.  Still, many people don’t educate themselves on this valuable protection.  The reasons are varied but we are going to attempt to clear any of the confusion.

I heard that if I never need the insurance, I lose the premiums I paid.

In many Long-Term Care insurance policies, if the insured person never requires care, then the premiums are in fact lost.  There are however two options if loss of premium is a concern of yours:

1. You can add a Return of Premium rider to your policy.  This rider will refund all premiums, less claims paid, to a beneficiary upon death of the insured person.
2. Utilize a Hybrid Policy. These policies combine Life and Long-Term Care Insurance.  In short if you need care, you can accelerate the life insurance death benefit during your lifetime to pay for such services.  If care is never required, the beneficiary would receive the tax-free death benefit.

Can my Long-Term Care Insurance company increase my premiums?

Long-Term Care Insurance companies can increase premiums over time if the state in which the policy was issued approves a class-wide rate increase.  You’re not stuck though!  Your options are:

1. If you have a Long-Term Care insurance policy or are considering one, and a rate increase is approved, the insurance company has to give you options to alter or decrease your policy benefits in order to keep your premium the same or lessen the impact on them.
2. If you never want to face even a possibility of a rate increase, then you may want to consider a Hybrid Policy. A hybrid policy can be paid using a single premium or you can pick a 10, 15, 20-year or life time premium payment.  However, certain policies will guarantee that the premium will NOT increase over time.

Long-Term care is NOT for me because I do not want to end up in a nursing home!

Quite the contrary.  Long-Term Care insurance is often referred to as “Stay out of Nursing Home” Insurance.  Nearly 80% of all Long-Term Care insurance claims are paying for Home and Community Based care.

Can a family member or non-licensed providers help care for me using my Long-Term care policy?

Some Long-Term Care Insurance policies require the insured person to use a licensed agency to provide home care, however, if you want the flexibility to be able to pay anyone you wish, then let that concern be known to your Long-Term Care specialist and he/she can design the right plan for you.

1. Choose a policy that pays CASH benefits or a policy that has a rider to allow for Independent Caregivers.  Once the insured person is eligible for claims, the policy will simply send a check on the first of each month to be used however he/she sees fit.
2. Utilize a Hybrid Policy that pays benefits on an indemnity basis. This policy would simply allow the insured person to use 2% of the death benefit per month in cash to pay for care.

I heard Long-Term Care Insurance is expensive.   I can’t afford it!

Long-Term Care Insurance is no different than any other product or service you purchase.  Price (or premium in this case) can be as high or as low as we need or want it to be.  Age and health come into overall cost with most insurance, so planning as soon as possible will only help.

1. Design a Long-Term Care Policy geared more toward the cost of Home Care, which is typically half the cost of a nursing facility, which would in turn cut your premium in half.
2. Pay premiums once per year, which saves on average of 8% per year.
3. Social Security and Required Minimum Distributions are on the horizon. Utilize this “new found” income, if it’s not needed, to pay your insurance premiums.
4. Existing Whole Life Insurance Cash Values that have grown can be used to fund a Hybrid policy through a 1035 exchange.

*If you’d like a consultation with Brian Johnson to discuss your Long-Term Care needs, contact him directly by phone 800-695-8224 (ext. 154) or email at bjohnson@nyltcb.com. If you would like for Bouchey Financial Group to coordinate the meeting, please contact us directly at 720-3333.