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Q&A With A Long-Term Care Insurance Expert

This weekend we had the chance to ask an insurance expert some pertinent questions about Long-Term Care insurance (LTCi).  This summarizes our questions and her responses.

What is LTCi?

  • Long-Term Care Insurance is the only type of insurance that pays for non-medical nursing care for people who need help The exception is Medicaid, which only kicks in once your assets have been spent down to a virtual poverty level.

Who needs LTCi, and why?

  • Everyone has a personal opinion as to the net worth of the client who will need LTCi.  In her opinion, people with a net worth over about $400,000 and under about $6 Million should consider buying a policy.
  • My personal range is a little narrower, but the idea is the same.
  • Younger people who re saving and on the path to a solid Net Worth need to build it into their plans.

How many companies still write LTCi?

  • There are currently about a dozen carriers who write these policies.
  • This is down from over 100 when the idea was fairly new.
  • There has been some consolidation, and many carriers simply stopped writing new policies.

How do you judge quality of carrier?

  • The best way to check the financial stability of an insurance company is to check the COMDEX score.
  • COMDEX is a composite, and is available on the Internet.
  • Ratings between 90 and 100 classify the company as “A-Rated”.
  • Since the future benefits are to be paid by the company, be sure to use an A-Rated company to assure their viability when you need it the most.

Should I use a captive agent or an independent agent?

  • Independent agents represent a variety of companies, whereas captives only represent one.
  • Having choices is a good idea, as all companies are different.
  • Good agents and “not-so-good” agents can be found anywhere, and a good recommendation might help.
  • In aby case, LTCi is complicated, and consulting a knowledgeable professional is a necessity.

Is LTCi worth the cost, and at what age?

  • For a client with a net worth in the range above, it can literally save your assets from a spend-down later in life
  • The earlier the better, as pricing is age-related and favors the young.
  • Also, about 30% of benefits are paid annually to people in the age range 18 to 64.
  • This is not just illness, but also accidents, which are more common in younger people.
  • In our practice, we call LTCi “Wealth Insurance.”

What is the Partnership Program?

  • Florida and several other states collaborated with carriers and the Federal Government to implement the Partnership program.
  • It is essentially a benefit-sharing concept between spouses and/or Medicare to allow the policyholder to retain more assets.
  • It can also lower the needed initial policy benefit level using the sharing concept.

What policy riders are most important?

  • The inflation Rider, whether compound or straight line, is critical to maintaining benefit levels over time.
  • There is also a Future Purchase Option, or FPO, which allows benefit levels to grow at the owners’ discretion.
  • The FPO can be much less expensive, but must be carefully planned.
  • When comparing options, a higher initial daily benefit and FPO may yield better results per dollar of premium.

How has Obamacare affected LTCi?

  • Very little, actually.
  • The Government encourages everyone to take personal responsibility for their future care.

If you are already covered and get a price increase, are you helpless?

  • Not at all.
  • An insurance professional can negotiate with your carrier to make alterations in your policy down the line should it become unaffordable, or in other ways imperfect for your circumstances.

A qualified Certified Financial Planner will assess your need for Long-Term Care insurance during the planning sessions.  We can then work together with professional insurance agents to be sure that your needs are being covered at the lowest available cost.

Van Wie Financial is fee-only and sells no products.  Working with other professional who represent insurance carriers is part of our service.