Increase Premiums for Medicare Part B
July 19, 2015
California now has 6.9 Million Uninsured Residents
July 19, 2015

The Proposed Long-term Care CLASS Act

The recent shelving of the proposed long-term care CLASS Act by the Department of Health and Human Services has perhaps one residual side benefit

The recent shelving of the proposed long-term care CLASS Act by the Department of Health and Human Services has perhaps one residual side benefit – it has reintroduced the topic of long-term care insurance protection to the public. Although no one likes to think about his or her own, or a loved one’s, decline and disability with aging, most of us will face these issues eventually, whether you think that you need it, or not.

November has been designated as Long-term Care Awareness Month by the insurance industry. Most people know of someone, perhaps a friend, or a relative, or they themselves, who has had direct experience of needing to provide hands-on care to a loved one. The emotional effects on spouses and family members can be exhausting. As a result, many persons are looking purchase long-term care insurance to provide help in this situation. One great advantage of this insurance is that most policies now cover home care and assisted living care as well as nursing home care. Most elderly people wish to avoid having to move into a nursing home.

The financial impacts of paying for long-term care costs can be devastating. The annual cost of nursing home care in some parts of the country is as much as $10,000 a month. In California the average is approaching $300 per day. A prolonged need for long-term care can rapidly deplete the finances of even the best-planned estate. As a result, many seniors look to purchase long-term care insurance to cover this financial risk.

The two biggest problems with long-term care policies now are that the cost of the premiums is out-of-reach for most seniors and the refusal of insurance companies to guarantee their rates. An average premium for a policy to insure a couple in their early 60’s for 2 years of comprehensive long-term care benefits ranges from about $4,500 per year to over $7,000 per year depending upon the design of the coverage and their health conditions. And these rates are predicted to rise at 7% annually. The younger you are when you purchase a policy, the lower the premiums will be. But if you wait until you are in your 70s, the premiums will be extremely high. In 2010, a major company’s long-term care policy offering a modest $175 per day long-term care benefit for 5 years, with an inflation rider, cost a 55-year-old a national average of $1,920 a year, while the same policy had an annual premium of $2,508 for a 65-year-old and $3,104 for a 79-year-old.

Another problem with long-term care insurance is that by the time many people look to purchase policies, they are uninsurable due to health problems. The solution to this problem is to purchase policies while you are younger and still healthy. The major issue here is that most young, healthy people do not believe that they will ever need long-term care coverage, or that they will simply die before ever receiving a benefit.

A possible solution is for them to purchase a life insurance policy with a long-term care rider which has guaranteed “living benefits” for life. Some life insurance companies are offering long-term care benefits combined with their life insurance products. These are called “linked-benefit” life insurance products which add a long-term care rider usually to a universal life insurance policy. The major advantages of these products are they pay no matter what the buyer’s life situation becomes – a long-term care benefit if needed, or a death benefit if long-term care is not needed. Further, these policies provide substantial leverage for every insurance dollar invested – usually about 2 to 1 for the death benefit and 4 to 1 for the long-term care benefit. The buyer will need to determine whether this is a better solution than separate long-term care and life insurance policies.

Long-term care insurance has attracted much media attention, and many insurance agents are now selling it. However, long-term care insurance is a complex product that should be approached with caution. If you are considering long-term care insurance, you need to consult with a qualified professional to determine whether you can afford this type of coverage and whether the policy you are considering meets your unique family care needs and financial goals.

The recent shelving of the proposed long-term care CLASS Act by the Department of Health and Human Services has perhaps one residual side benefit

The recent shelving of the proposed long-term care CLASS Act by the Department of Health and Human Services has perhaps one residual side benefit – it has reintroduced the topic of long-term care insurance protection to the public. Although no one likes to think about his or her own, or a loved one’s, decline and disability with aging, most of us will face these issues eventually, whether you think that you need it, or not.

November has been designated as Long-term Care Awareness Month by the insurance industry. Most people know of someone, perhaps a friend, or a relative, or they themselves, who has had direct experience of needing to provide hands-on care to a loved one. The emotional effects on spouses and family members can be exhausting. As a result, many persons are looking purchase long-term care insurance to provide help in this situation. One great advantage of this insurance is that most policies now cover home care and assisted living care as well as nursing home care. Most elderly people wish to avoid having to move into a nursing home.

The financial impacts of paying for long-term care costs can be devastating. The annual cost of nursing home care in some parts of the country is as much as $10,000 a month. In California the average is approaching $300 per day. A prolonged need for long-term care can rapidly deplete the finances of even the best-planned estate. As a result, many seniors look to purchase long-term care insurance to cover this financial risk.

The two biggest problems with long-term care policies now are that the cost of the premiums is out-of-reach for most seniors and the refusal of insurance companies to guarantee their rates. An average premium for a policy to insure a couple in their early 60’s for 2 years of comprehensive long-term care benefits ranges from about $4,500 per year to over $7,000 per year depending upon the design of the coverage and their health conditions. And these rates are predicted to rise at 7% annually. The younger you are when you purchase a policy, the lower the premiums will be. But if you wait until you are in your 70s, the premiums will be extremely high. In 2010, a major company’s long-term care policy offering a modest $175 per day long-term care benefit for 5 years, with an inflation rider, cost a 55-year-old a national average of $1,920 a year, while the same policy had an annual premium of $2,508 for a 65-year-old and $3,104 for a 79-year-old.

Another problem with long-term care insurance is that by the time many people look to purchase policies, they are uninsurable due to health problems. The solution to this problem is to purchase policies while you are younger and still healthy. The major issue here is that most young, healthy people do not believe that they will ever need long-term care coverage, or that they will simply die before ever receiving a benefit.

A possible solution is for them to purchase a life insurance policy with a long-term care rider which has guaranteed “living benefits” for life. Some life insurance companies are offering long-term care benefits combined with their life insurance products. These are called “linked-benefit” life insurance products which add a long-term care rider usually to a universal life insurance policy. The major advantages of these products are they pay no matter what the buyer’s life situation becomes – a long-term care benefit if needed, or a death benefit if long-term care is not needed. Further, these policies provide substantial leverage for every insurance dollar invested – usually about 2 to 1 for the death benefit and 4 to 1 for the long-term care benefit. The buyer will need to determine whether this is a better solution than separate long-term care and life insurance policies.

Long-term care insurance has attracted much media attention, and many insurance agents are now selling it. However, long-term care insurance is a complex product that should be approached with caution. If you are considering long-term care insurance, you need to consult with a qualified professional to determine whether you can afford this type of coverage and whether the policy you are considering meets your unique family care needs and financial goals.

Brian Schroeder
Brian Schroeder
Brian J Schroeder – Independent Broker - (925) 513-7778