Is Long-Term Care Insurance Right for You?

As baby boomers continue to live longer and healthier lives, questions swirl about when, how much, or even, if long-term care insurance (LTC) is the right option. With decades of insurance experience, Bruce Weinstein reveals how gender, age, and wealth are among the top factors in examining policy choices. “Long-term care insurance is one of the most important yet overlooked coverages,” Weinstein said. “It’s a safety net and an estate conservation tool against depleting assets as you age. This is especially true for a couple where one needs LTC services and uses up the assets, while the healthier spouse is left with very little. The latest statistics by the U.S. Department of Health and Human Services show that 70% of Americans over the age of 65 will need long-term care services. The sad fact is that no health insurance, including Medicare and Medicare supplements, cover these types of expenses for the long term. The only way to make sure you have coverage is by having your own LTC policy.”

According to Weinstein, better policies are comprehensive and can be used for nursing homes, assisted care facilities, or home care. The costs for these types of care services can be anywhere from $75,000 to $125,000 annually. Here is his advice:

• People with older policies that have liberal and extended benefits have seen the rates go up. They have benefits that can’t be purchased anymore. This is also a primary reason why new policies have gone up in price.
• Time period of coverages have decreased from lifetime to where the majority of companies only offer a maximum of a five-year benefit to limit their liability.
• Years ago, the rule of thumb was to buy coverage in your 50s. Now many are buying in their 40s as coverage options are decreasing and prices are increasing.
• Pricing as well as qualifying for coverage is based on your health and age. The younger and healthier you are, will get you a lower price base and probably a better benefit policy than if you wait to purchase.
• The two most popular policies are traditional and hybrid life/long-term care.

Traditional: These are comprehensive standalone policies that normally start after 90 days. For the short term, they are the least expensive. Rates for males are much less expensive than females, who have much greater chances of living longer. If a couple purchases together, there is a price discount. Pick the daily or monthly benefit as well as the time period. Usually, five years is the maximum allowed. Even though costly, most add an inflation rider so the benefits can keep up with the increasing costs. The negatives are that it is a “use it or lose it” benefit. Rates aren’t guaranteed for the future, so premiums can increase. If you pay for several years and want to quit, a few companies will give a reduced paid-up benefit. A few of the companies that currently sell this product are Mutual of Omaha (predominant), New York Life, and Genworth.

Hybrid life/long-term care: This is a permanent life insurance policy that covers both death and LTC benefits. If LTC is needed, a percentage can be used, usually 2% monthly. If the person dies before the policy is used up, the balance goes as a tax-free death benefit to the beneficiary. If LTC benefits are never needed, the entire death benefit is paid out. In addition, there is a cash value built up. While the rates start higher than the traditional LTC, they won’t go up and there will be a definite payout at the end. There are options to pay it up early; the rate base for females is very favorable. A few of these companies with this product is Equitable Life, Lincoln, and Nationwide.

• There are also annuity based LTC products and others that can be paid up using the IRS 1035 Exchange, which is tax-free, he says.

So, who doesn’t need LTC? Very, very high liquid net worth individuals, if they have enough assets to pay out of pocket, Weinstein says. He has wealthy clients who still want coverage because insurance premiums are far less than the benefit they could receive, and it provides a sense of security. The hybrid/LTC policy is popular because there is a definite leveraged payout.

“I also have clients that have extremely high net worth,” he says, “but aren’t liquid (such as real estate or businesses). Above all, meet with someone knowledgeable to evaluate your situation and design solutions.”