Archive for April, 2016

When Should You Buy Long Term Care Insurance?

April 28, 2016

Quick answer: The day before you are diagnosed with something that makes you uninsurable.

More thoughtful answer: It depends.  What is your age?  What is your life stage?  What other pressing needs have been taken care of?  Do you have discretionary income?  What else is important to you?  Can you qualify medically?

Let’s start with a couple in their 20s or 30s, with or without small children.  Their first priority should be adequate life insurance, disability insurance and health (medical) insurance.  Stuff happens…often when we least expect it.  The consequences of inadequate insurance are catastrophic.  Long term care insurance is probably not at the top of your list at this time (but I cannot guarantee that the need for long term care services will not occur).

Single’s in their 20s or 30s:  Same as for couples in the same age range except that life insurance may or may not be needed.

Couples in their 40s: Still need adequate life, disability and health insurance.  You are younger than you will ever again be.  This is the time to start thinking about long term care insurance and, if it can fit into your budget, should be applied for.

Singles in their 40s: Get it now if you can.  Must have disability and health insurance.  Life insurance as well, if someone else is depending on your income (Examples: a child, business partner, former spouse).

Couples and singles in their 50s: The second-best time to apply for long term care insurance.  Long Term Care naturally fits into discussions about retirement.  Likely to be healthier than at any time in the future.  Consequently, the best chance of being approved, and being approved at a better rate.  The best time?  That was when you were younger.  The third-best time?  Tomorrow instead of today.  Remember, you must qualify medically.  Your very next doctor appointment could result in your becoming uninsurable.

Couples and singles in their 60s:  Almost your last opportunity to defend against the high cost (in both dollars and in family relationships) of long term care services.  If you are still healthy, long term care insurance remains available to you.

Age 70 to about age 75:  This is truly your last chance.  Most people in their 70s have medical issues and long term care insurance, if obtainable, is very expensive.

Beyond about age 75:  You waited too long.  Long term care insurance is no longer an option.

What determines the cost of long term care insurance?  For a given policy design (what benefits are included), the factors are: Age, gender, health, and relationship status.  The younger and you are, the less it will cost.  Women pay more than men because women account for more claims, and more that are very costly.  There are significant discounts for married and other committed couples.

Important: Policy cost varies widely among insurance companies for the same coverage.  That is why it is important to work with an experienced, independent, insurance broker who has access to multiple carriers.

 

 

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 & often 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, 2016

 

 

 

 

Should Everyone Have Long Term Care Insurance?

April 26, 2016

No!  But everyone needs a plan for when they will need long term care.  Without a plan, you are like a rabbit in an alligator farm…trying to dodge one crisis after another.  With a (good) plan, you remain in control.  Your family will not go broke trying to take care of you.  Your children will still talk to each other long after you are gone.  Your spouse or adult daughter will not have their own health compromised as a result of being a hands-on caregiver.

A plan for long term care does not necessarily include insurance…but must identify how care will be provided and paid for.

Who should not buy long term care insurance?

  1. Anyone who cannot qualify medically…insurance is not an option if the applicant cannot get through the underwriting process.
  2. Anyone who would soon qualify financially for Medicaid.  A single person (widowed, divorced or never married) at the time of Medicaid application is not permitted to have more than $2,000 in countable assets (This is not a typo.).  A married couple can have no more than $121,220 no matter how titled.  For purposes of Medicaid qualification, home equity is generally not included in these amounts.  There are also income maximums, but total assets are what cause the most problems with Medicaid eligibility.  Note: Medicaid long term care does not provide the highest level of care in the most desirable locations, but it is a safety net for people with little or no money.  Another note: Please do not confuse Medicaid with Medicare.  Medicare is the primary health insurance program for Americans better than age 65.  Medicaid provides health care and long term care services for people without money.
  3. As implied by “Anyone who would soon qualify financially for Medicaid.”, people having trouble putting food on the table, or keeping a roof over their heads should not be spending scarce dollars on insurance.

Who should buy long term care insurance?

  1. Anyone who can qualify medically and has some amount of discretionary income that could be allocated to insurance.  Long term care insurance does not need to be expensive.  Call me to discuss.
  2. Anyone who can qualify medically and who has a family member willing and able to pay the insurance premium.
  3. Anyone who can qualify medically and who has enough net worth to pay for all conceivable costs of long term care services.  What is Ray saying?  Can afford to pay for care itself, but should still buy insurance?  Yes!  High and moderate net worth people either already have estate plans (or should have) or they are going to in the near future.  Could a care event potentially costing $1.0 million or more disrupt a carefully thought-out estate plan?  Of course it can!  People do not accumulate net worth by taking on risks they can easily, and inexpensively, offload.  The best example I can think of is the individual who owns a high-end home free and clear…no mortgage.  Does this person have fire insurance (homeowners insurance) even though it is not required?
  4. Do you see a theme here?  Even if you had all the money in the world, you still must qualify medically.

You do not necessarily have to buy long term care insurance, but you must have a plan…else your family, and perhaps yourself…are going to suffer.

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 & often 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, 2016