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Re: Is long-term care insurance part of your future plans?
>>If like many people, they have a life insurance policy, it can be converted into senior care payments. The policy is sold and the proceeds are placed into a FDIC insured account that pays the care provider. This is known as a long term care benefit program. It is not ver well know. However, it is every person's legal right to do this>>
This is the second forum I have seen this stated as a fact. I'm a little curious as to whether the poster of this above statement has actually investigated doing this. The reason I'm dubious is that it's my understanding, as follows:
- If someone purchased a whole life (or variant thereof) policy some years previous that DOES NOT have an LTCi option, it is wholly the discretion of the insurer as to whether they will allow that policy to be converted to a newer policy with the LTCi benefit. The latter are new products to the marketplace, and conversions often require either additional underwriting and/or fees and caps. And if your WL policy is relatively new, you may have very little cash value in it.
- Most WL policies are not large face amounts. Indeed, for many decades the average WL policy had a face amount of only $40,000. To fully pay it up (and make the $40K completely cashable) generally took 30 yrs. WL policies are expensive because of the cash reserve they build up; that's why term life, with no cash reserve (and therefore no LTCi value whatsoever), is so much cheaper. It might interest others to know that at least when I worked in insurance, for over fifteen years, I did not know a single insurance executive or salesperson who owned a WL policy. Universal or Variable Life policies, which were introduced in the '70's/'80's, were used by wealthier execs for estate protection and tax planning purposes, which is their best use.
- Because I was curious, I googled this topic of insurance conversions, and here's what the government's own website says about these. http://longtermcare.gov/costs-how-to-pay/using-life-insurance-to-pay-for-long-term-care/.
Now, if you can convert to one of the new hybrid WL/LTCi policies, it may or may not be a good deal for you depending on what the conversion is going to cost. And remember, skilled nursing facility costs have been going up 5%/annually for decades. Having researched and moved my MIL into a full-service seniorcare facility, I can tell you that she paid $4K/month for Asst Living with a minimal cost for some extra assistance, and had she gone into Memory Care or skilled nursing units at the CCRC, the cost would have been $8K/month.
I would be very surprised if most WL policy owners had enough cash value in their policies to pay the $96K/yr (and don't forget those 3-5% cost increases every July!).
For my DH and I, we have separate LTCi policies purchased through our state pension fund, which is highly activist in protecting and pursuing retiree rights. Is it costly? Yes. We've had four premium increases and are facing another one, phased in over two years. I was very familiar with how insurance is priced. Because of this, I knew from the very start (15 yrs ago) that rates would increase. We have been fortunate to have a flexible budget due to in-depth financial planning, so the occasional increases can be managed.
Is it worth it? Yes. The cost of our two policies total for one year's premiums, after the 2016 premium increase, equals exactly one month's worth of care for one of us. We need the financial protection, and don't begrudge it.
Re: Is long-term care insurance part of your future plans?
Long term care insurance is often too expensive or becomes too expensive with premium increase. This is an unfortunate reality of the insurance world. Another sad fact is that many people are not aware of the need to plan for the cost of long term care unless they have experienced a family member or friend going through this experience.
So what generally happens is that at a time in life when a person is living on a fixed income a health care crisis arises. They struggle to afford the care they or their loved one needs, paying for it out of savings. But statistics show that 75% of retirements savings are completely utilized withing one year of needing long term care. Now, what can they do? They are forced to become wards of the state and apply for Medicaid.
Maybe not, If like many people, they have a life insurance policy, it can be converted into senior care payments. The policy is sold and the proceeds are placed into a FDIC insured account that pays the care provider. This is known as a long term care benefit program. It is not ver well know. However, it is every person's legal right to do this
Re: Is long-term care insurance part of your future plans?
At age 40, I was lucky to sign on with a company offering portable LTC insurance for $30 per pay period for me, and the same for my wife, so I signed up. I have no sense at all that I have been throwing money away by starting so early. I have locked in these low premiums for hopefully the rest of my life. $120 a month I can deal with.
Is long-term care insurance part of your future plans?
I looked into LTC for my parents and it would've cost me $400 a month, which I decided to put into investments rather than LTC so at least when my folks needed it i'd be free to do with that money as I wished, rather than have to debate/negotiate my parent's long term care with an insurance provider. Does anyone have some work arounds that I haven't considered?
Don't Grow Old Without It
By KELLY GREENE
Long-term-care insurance: It can make the difference between living out your life the way you want and becoming a burden to your family or a ward of the state.
But it is becoming significantly more expensive, more complicated and harder to get with each passing year.
Average premiums on new policies-which help pay for nursing-home, assisted-living and home care-have risen some 6% to 17% in the past year alone, according to the American Association for Long-Term Care Insurance, a trade group. Some insurers have even doubled their premiums on existing policies. The increases come as the industry grapples with low interest rates and policyholders who are living a lot longer than the actuaries said they would.
At the same time, big companies like Prudential Financial and MetLife have stopped selling new policies in the individual market, continuing a trend that began several years ago. Ten of the top 20 writers of individual coverage five years ago have announced their exit, according to Limra International, an industry-funded research firm.
Ken Kacenga, a 65-year-old doctor in Sierra Vista, Ariz., who plans to retire later this year, got hit with a 23% premium increase recently on the long-term-care insurance he and his wife bought several years ago. The couple struggled with whether to drop the coverage, he says, before finally deciding to keep it for another year while shopping around for other options.
"My fear is…it could become unaffordable as I get into the fixed-income stage of my life," Dr. Kacenga says.
Costs vary widely, even for coverage that is basically identical, according to a March study by the long-term-care insurance group. For example, a $150 daily benefit, lasting three years for a married couple aged 65 in "standard" health, ranges in price from $3,815 a year to $7,129.
That means you could pay nearly twice as much for the same benefits as someone insured by a different carrier.
Unfortunately for consumers, shopping around is difficult. Policies from different carriers are packaged with a proliferating number of bells and whistles. Life-insurance policies and annuities that include long-term-care benefits are introducing more options, but also making the selection process that much more involved.
So how can you figure out how to get the best deal on long-term-care insurance, whether you are buying it for the first time or being hammered with rate increases?
Besides your age and health, three factors have the biggest impact on determining your premium: the daily benefit, the length of coverage and the inflation protection you choose.
To get a sense of your future daily costs where you expect to live in retirement, go to Genworth.com/costofcare. Home care can cost much less than more-intensive institutional care. In Wilmington, N.C., for example, a home-health aide working 44 hours a week costs $40,566 a year, compared with $68,438 for a private nursing-home room with round-the-clock coverage.
You need to decide whether you want a policy to cover the bulk of your exposure, or if you would rather rely on other savings to supplement it, says Natalie Karp, a long-term-care insurance broker in Roslyn, N.Y.
"The new reality is, something is better than nothing," she says. "Get what's affordable and sustainable."
You also will need to select a coverage period, typically ranging from two to six years. If you select $250 a day for three years, for example, you would have a "pool" of $273,750 (multiply 250 by 365 and then by three). If you use less than $250 each day, your benefits would typically stretch longer than three years.
A decade ago, the conventional advice was to spring for unlimited lifetime coverage. That option has become so expensive and so unpredictable for insurers that some have dropped it altogether. Instead, for most people, it is best to choose a "short and fat" policy, with fewer years' coverage and a larger daily benefit. Most people buy three years' coverage, as the average nursing-home stay lasts about that long—though that could follow years of other care.
Many experts consider the level of inflation protection you choose to be the most crucial piece of the policy. Since people typically make their first claims around age 80, those buying policies in their 50s and 60s need to make sure their coverage keeps up with rising medical costs. (Home-health-care expenses remained flat this year, compared with 2011, but skilled nursing-care costs increased 4%, according to Genworth Financial.)
The most expensive—and widely recommended—option is 5% compound inflation protection, meaning your benefits increase in value by 5% each year. For example, your pool of $273,750 would be worth $726,343 in 20 years.
Then there are other inflation hedges meant for older buyers priced out of that option, including 3% or 4% compound, 3% or 5% simple (meaning a $100,000 benefit would simply get $3,000 or $5,000 tacked onto it each year), 5% compounded for 20 years only or one linked to the consumer-price index.
Brace yourself for a rate increase.
Insurers can't raise rates on individuals, but they can do so on a defined group of policyholders if they get state approval. Benny Stansbury, a 70-year-old retired engineer in West Monroe, La., dropped a policy he bought from a smaller carrier after being hit with a 105% rate increase.
The lesson: It pays to look for insurers that have strong financial statements and conduct significant business in your state.
The majority of rate increases should be over, now that insurers have factored in the impact of low interest rates on their ability to generate income to pay claims and lengthening life expectancies, says Dawn Helwig, a principal with actuarial firm Milliman in Chicago.
But many insurance brokers tell their clients to expect at least one increase in the 20% range at some point. If that happens, most insurers will allow you to reduce the increases in exchange for trims in benefits.
Insurance agent Nancy Courser helped Rob Deane, a 75-year-old retired Navy surgeon in Grand Rapids, Mich., lower the 77% rate increase on his 70-year-old wife's John Hancock policy to 46% this month by reducing her 10 years of coverage to six years. Rather than seeing premiums rise from $3,619 a year to $6,406, they will go up to $5,269.
Insurers are getting pickier.
Medical underwriting is getting "more conservative," says Buck Stinson, Genworth's president of U.S. insurance products, and rejection levels are growing.
Eleven percent of applicants under age 50 were denied in 2010, up from 7% in 2007; 17% of applicants in their 50s were denied, up from 14%; and 24% of those in their 60s were denied, up from 23%, according to the American Association for Long-Term Care Insurance.
Evidence of chronic conditions often knocks out applicants. People with diagnosed memory loss or arthritis are almost always denied, and insurers are getting tougher on osteoporosis and diabetes, experts say. Ms. Karp has even had clients rejected for being too thin.
Surprisingly, insurers approve survivors of some conditions, if they can show resolution and stability, including cancer, bypass surgery, Crohn's disease, congestive heart failure and forms of hepatitis, Ms. Karp says.
Insurers scrutinize two to three years' worth of medical records, including those kept by specialists, test results and prescription-drug databases. They also may require phone interviews and face-to-face meetings.
Rest up beforehand: Much of what your interviewer asks is designed to screen for cognitive problems. "They ask you to count down from 100 backwards, or you have to name as many fruits as you can," says David Hays, president of Comprehensive Financial Consultants in Bloomington, Ind.
Go for cash and flexibility.
A few insurers offer cash benefits of up to half your monthly allowance and require no receipts. You still have to meet the threshold for needing care that most insurers require: Documentation from your doctor that you require help with at least two "activities of daily living," which include bathing, dressing, eating, getting in and out of bed and to the bathroom, continence, and walking, or that you need care due to cognitive impairment.
With the cash option, the insurer cuts you a check with no other questions asked, which you can use to buy care however you wish, from hiring a family member to moving to a resort. This also can be useful if you plan to retire overseas, says Rona Loshak, Ms. Karp's business partner, though some policies limit how much cash can be used for international expenses.
Make sure your policy includes an "alternate care benefit," which generally features language recognizing that new trends in long-term care are emerging, and coverage could be provided in the future for those not specifically spelled out now. Today's more popular options—home care and assisted living—weren't even covered under many insurance policies issued two decades ago.
Also consider a "shared care" rider that gives you and your spouse access to each other's benefits if you use up your own.
Make the government your partner.
The Long-Term Care Partnership, a federal and state program now available in about 40 states through 30 insurers, lets people preserve some of their assets and still qualify for Medicaid if they have purchased a long-term-care insurance policy.
In most states, it works like this: You buy, say, $250,000 in coverage. If you use it up, you can qualify for Medicaid while protecting up to $250,000 in assets.
The catch: States generally require that you buy an inflation-protection rider and a specific amount of coverage. Depending on your age and health, that may not be affordable. If you were going to buy the coverage level that the state requires anyway, "there's no additional cost to buying a Partnership plan versus one that's not, so why not buy it?" says Mr. Hays.
Exploit tax breaks.
Depending on where you live, tax breaks could ease your payments significantly. New York, for example, offers a 20% income-tax credit for annual premiums. And if your spouse has medical bills steep enough to itemize on your federal tax return, you might reach the threshold to deduct premiums as a medical expense.
If you are a business owner or partner, the firm can deduct specified premium payments for you and your spouse, depending on your age, from your federal taxes owed. And if your business is a "C" corporation, it can deduct the entire bill. In that case, you may want to consider a policy with higher premiums that are due for only 10 years, or until you turn 65.
Consider a hybrid.
The biggest stumbling block for buyers of long-term-care policies: Writing a big check for a product you hope you never have to use. Increasingly, retirees are turning to permanent life-insurance policies and deferred fixed annuities packaged with long-term-care benefits to cover the risk of spending much of their savings on nursing care.
The appeal: You or your heirs get a payout even if you don't use long-term care, though it often is more costly to buy combined coverage than to buy separate policies, experts say.
In most cases, people buy these products with a single lump-sum payment, effectively removing the risk that they could get hit with future premium increases.
There are other tax perks as well: Payouts used for long-term care generally aren't taxable, and funds can be transferred directly from an annuity or life-insurance policy to buy such a "hybrid" without being taxed, either.
But there also is a big unknown: Most hybrid products have been around for only a few years, so very few people selling them have any clients who have tried to collect the benefits yet.
"We have no way of knowing if these policies will self-destruct in the future or not," says Mary Ahearn, a financial planner in Cochise, Ariz. "But they are offering to lock in our risk."
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