Archive for March, 2013

No-Risk Way to Save on Long Term Care Insurance Premiums

March 26, 2013
Insurance premiums may be paid monthly (by automatic bank draft), quarterly, semi-annually, or annually.  
For most people, quarterly is not a good choice because a bill for a significant amount arrives every three months.  If your long term care insurance quarterly invoice lands in the pile of things to get to…and you don’t take care of it within the 31-day grace period, your policy can terminated.  That three-month bill seems to come more often than it actually does.  Selecting semi-annual poses a similar problem.  This leaves automatic monthly bank drafts or annual premium payments as the two remaining choices.  A very small number of my clients pay their premiums quarterly and I do have one who has selected semi-annual.
Automatic monthly bank draft:  The most convenient method.  About 85% of my clients pay their premiums this way.  Insurance payments are on “auto-pilot”.  You can be out-of-town (or out of the country) when your premium becomes due and it will still be paid.  No need to write a check or find a postage stamp.  You do not have to do anything…almost.  It IS important that you enter each payment in your bank (or credit union) account register or you may find yourself overdrawn.  You do need to let your insurance broker know if you change banks so the automatic draft can be set up on the new account without interruption.
Annual premium payments: Around 13% of my long term care insurance clients pay annually.  This is how you can save on your insurance without sacrificing any policy benefits.  Most long term care insurance companies (Genworth, John Hancock, MedAmerica, Transamerica, Mutual/United of Omaha) offer a 7.4% discount for paying annually when compared to monthly.  MassMutual’s similar discount is 5.3%.  The two downsides to paying annually are: 1) You do have to write a check once per year and 2) Paying annually obviously has an impact on cash flow.   I pay my own long term care insurance premium annually.
Bottom Line: All of the major long term care insurance companies offer a choice of premium payment frequencies: Monthly (but only by automatic bank/credit union draft), quarterly, semi-annually or annually.  You should select the frequency that best meets your budgetary needs.  Provided cash flow permits, I do recommend paying your premium annually to take advantage of the guaranteed savings. 

Disclaimer: Actual policy language, rather than the contents of this eNewsletter always takes precedence.  Long term care insurance policies vary widely from company to company & within the same company.  Raymond Smith, The Long Term Care Specialist, does not give legal or tax advice.  Consult your tax advisor or attorney for these matters.


© Raymond Smith, The Long Term Care Specialist, 2013


Best Place to Buy Long Term Care Insurance?

March 26, 2013

Last week I received a phone call.  “Ray”, the caller said: “I like working with you, but your prices are too high.”   “My brother-in-law suggested that I call his insurance guy so I did.  His monthly premium, for the same policy, was $200 a month lower than yours.”   Using my subscription software, we began to compare the two proposals. 

Same insurance company? Yes. 

Same rate class?  No.  The other proposal was based upon being approved at the best rate class.  I had shown the second-best class (based upon medical history, I knew he would not qualify for best class…in fact I had confirmed this with the underwriter.) 

Same monthly benefit?  Not exactly.  After earlier discussing the caller’s assets and potential for generating income, I had proposed a monthly benefit cap of $6,000.  The other proposal was for a DAILY cap of $200….sounds like the same as $6,000 per month, but it is not.   Example: You may need four hours per day of home care, seven days per week.  At $25 per hour (Metro-Denver), that would cost $100 per day, $700 per week, or $2,800 per month (with four weeks in a month as my simplifying assumption).  Now let’s add the need for a speech therapist one day per week at $300 per visit.  You would then be spending $400 one day per week, plus $100 per day, six days per week for a total of $1,000 per week.  Continuing with my assumption of four weeks in a month, you would then  be spending $4,000 per month for care.  A $200 daily benefit cap would result in a monthly reimbursement from the insurance company of only $3,200.  With a $6,000 monthly benefit cap your reimbursement would be $4,000.  This is my long-winded way of saying a monthly benefit cap is better than a daily cap.  Note: You are reimbursed for what you actually spend, up to the monthly or daily benefit cap.  Any amounts that may be between your reimbursement and cap, remain in your total benefit pool.

Same Benefit Period?  Yes, five years for both.

Same Inflation Protection: 3% compound for both?  No!  My proposal included 3% compound.  The other had 3% simple, a big difference.  With 3% compound, at the end of 10 years, the total benefit pool would grow to $483,810, but only $468,000  with 3% simple.  In 20 years, the comparison would be $650,200 for 3% compound and $576,000 with 3% simple.

Long term care insurance rates are highly regulated.  For a given person, living in the same state, buying a policy with the same benefits, from the same insurance company, the premium will be exactly the same regardless of where the policy was purchased…to the penny.  You can buy a policy from me, another broker, a financial planner, online, or sometimes even directly from the insurance company.  The cost will be exactly the same. 

So if premiums (costs) are exactly the same, does it matter where you buy your policy?  Yes it does!  Rates vary greatly from one insurance company to another.  Everyone’s needs (and consequently policy designs) are different.  Who is an acceptable risk is different from company to company and this changes all the time.

It takes someone who has specialized in long term care for many years to know the differences…to be able to guide people toward the policies with the benefits they need, and at the lowest cost.  Long term care insurance is complicated.  What is available changes weekly.  An agent or broker (both are called “insurance producers” in Colorado) who handles investments, life insurance, disability insurance, and perhaps medical and auto insurance cannot possibly stay on top of the constantly changing long term care insurance market.  A few words about an agent/broker who only represents one insurance company compared to many companies: No one insurance company can possibly offer the best solution to everyone.  Please call or email with your questions and comments.  I always enjoy hearing from my readers.

Disclaimer: Actual policy language, rather than the contents of this eNewsletter always takes precedence.  Long term care insurance policies vary widely from company to company & within the same company.  Raymond Smith, The Long Term Care Specialist, does not give legal or tax advice.  Consult your tax advisor or attorney for these matters.


© Raymond Smith, The Long Term Care Specialist, 2013

Very Long Term Care

March 1, 2013

Years ago, at my aunt Ida’s funeral, my Mom turned to me at said “When its my time to go, I want to be buried just like my sister.”  Without my giving it much thought, Mom had actually made her own final arrangements…she pre-planned.  In that later terrible time of crisis, what a relief it was to know exactly what Mom wanted.  Burial or cremation?  This casket or that one?  What should be shared in the obituary?  What kind of memorial service?  No family arguments.  No guessing.  I knew.  Let’s take a look at what happens to our families at the time of our death (You have read this far, so you may as well continue):

Without pre-planning: No one really knows what you would have wanted.  Sibling and other family conflicts boil over, sometimes to never be resolved.  Doubt runs rampant…am I doing enough to show how much he was loved?  Would she have wanted a graveside service?  Dozens of decisions must be made immediately and while under enormous stress to do “the right thing”.  Grieving families spend too much…and then feel guilty about not having spent more.

With pre-planning: You get to make clear, responsible and informed choices about your funeral service and burial choices.  Surviving family members know, with certainty, what you wanted.  You can even pre-pay most costs, thus locking in those amounts at current rates.  By pre-planning, you remove the need for loved ones to make often contentious decisions.  You make it so much easier for your family to mourn as they need to.

I do not offer this service.  Jamie Sarche in Denver does and I highly recommend her.  Jamie helped my wife and I work through these choices…so our kids won’t have to guess at what we may have wanted when our time comes.  Jamie can be reached at or 720-404-6772.  Please:  Do start the process by contacting Jamie Sarche or someone else who does what she does.  You will make things so much easier for those you leave behind.

Disclaimer:  This eNewsletter and all links to other sources should not be construed as tax or legal advice because it is not either.   Raymond Smith, The Long Term Care Specialist, does not give legal or tax advice.  Consult your tax advisor or attorney for these matters. 

© Raymond Smith, The Long Term Care Specialist, 2013