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Long-Term Care Insurance - Facts Consumers Must Know Before Buying?

Asked by karn singh in Personal Finance & Tax at 3:22 PM on February 20, 2009

Seema's Answer

Many of the articles you read discussing long-term care insurance use the term expensive when referring to this important protection. They fail to mention that there are many ways to obtain significant discounts today that can reduce the cost significantly; by between 20 percent and 50 percent a year. The industry's annual Price Index that portrays what consumers can expect to realistically pay for suitable coverage. For someone age 55, a $100 Maximum Daily Benefit x 3 Year Benefit Period costs $772-per-year (assumes the individual qualifies for preferred health and spousal discounts). Good health discounts can reduce the cost by 10 percent a year. Choosing a plan that pays benefits for 3 years will be between 25 and 30 percent less expensive than one that pays for five years. Today, some companies offer discounts to married couples, even when only one spouse buys.

Individuals Need To Health Qualify
Few people understand the need to health qualify for long-term care insurance. And, this is one of the biggest mistakes people make; waiting too long. Nearly 14 percent of the individuals who took the time to apply for long-term care insurance between the ages of 50 and 59 were declined for health reasons last year (2007). That number increased to 23 percent for those between 60 and 69 and an amazing 45 percent for those applying between ages 70 to 79.

As mentioned earlier, companies offer discounts to those who apply while still in relatively good health.

Some 44 percent of applicants between the ages of 50 and 59 qualified for good health discounts. The percentage drops to 32 percent for ages 60 to 69 and 19 percent for ages 70 to 79. Standards vary from one insurer to another so those with health conditions will benefit by working with knowledgeable long-term care insurance professionals who represents multiple insurers.

Prices Can Vary From One Insurer To Another
The difference in what you'll pay for basically the same benefit can vary quite substantially. Each insurance company has their sweet spots in terms of age and health condition. The Association recently did a study of costs for a typical applicant who was age 55. Costs for policies from New York Life were hundreds of dollars more than those from Genworth or John Hancock (all good companies). A policy from Northwestern Mutual cost $1,000 more each year. That's just one reason why it is increasingly important to speak to a professional who can access protection from multiple companies. You'll save yourself quite a bit of money over the long haul.

Group Long-Term Care Coverage May or May NOT Be Best Bet
An increasing number of employers now offer long-term care insurance to employees. That's a good thing and clearly there are some advantages to group coverage that may offer guaranteed acceptance (no health underwriting). But, individuals who are eligible for good health discounts and other discounts available to married couples may be able to obtain more coverage for less money from an individual policy sold by an agent or broker. Bottom line, as with most purchases it pays to compare.

Answered at 3:51 PM on February 20, 2009

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Cheap Long Term Care Insurance - 9 Ways to Cut Expenses ?

Asked by karn singh in Personal Finance & Tax at 3:22 PM on February 20, 2009

Seema's Answer

1. Buy a group policy through your employer.

Since it is a group policy that is subsidized by your employer, the premium will be lower that if you purchased an individual policy.

2. Apply for coverage before your next birthday.

Since your premium is based on your "issue age", the age you are when you apply for coverage, each year you wait your cost will increase by 8% to 12%.

3. Apply for coverage with your spouse.

This Joint or Shared Benefits Policy provides more flexibility in using your combined benefits and can lead to a Spouse/Partner discount of up to 25%

4. Take advantage of good health discounts.

By applying for coverage before you have health issues, you could receive a "Healthy Person" discount of between 5% and 25%. Even if your health deteriorates in the future, you will retain your "Healthy Person" discount for the rest of your life.

5. Take advantage of tax deductions.

Under current Internal Revenue Service (IRS) guidelines, premiums on tax-qualified long term care policies are considered medical expenses. If your total medical expenses exceed 7.5% of your adjusted gross income, you may be able to deduct the premiums on Schedule A. If you are a business owner, you can deduct all of the premiums for long-term-care insurance even if you do not you itemize.

6. Lower your daily benefit.

Lowering your daily benefit by 20% may result in a 20% lower premium.

7. Select a longer elimination period.

This is the amount of time that you pay out of pocket before the policy starts to pay. Increasing your elimination period from 0 to 90 days can save you up to 15% per year in premiums.

8. Make fewer Premium Payments

You can save 8% a year by making one lump sum payment instead of paying monthly or quarterly.

9. Get several quotes for long term care policies.

Prices for the same coverage can vary by hundreds of dollars, so it pays to shop around.

Answered at 3:51 PM on February 20, 2009

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2009 Tax Deductible Limits For Long-Term Care Insurance Announced ?

Asked by karn singh in Personal Finance & Tax at 3:20 PM on February 20, 2009

Seema's Answer

Tax advantaged long-term care insurance is one of the few remaining significant tax-savings benefits for small business owners. "In certain situations, the cost of long-term care insurance can be fully tax deductible for the business. Even spouses can be covered under a tax-advantaged plan.

There is still time to take advantage of tax deductions in 2008 and also benefit from the increased deductible limits next year. The deductible limits under Section 213(d)(10) for eligible long-term care premiums includable in the term 'medical care' are as follows:

Eligible Long-Term Care Premiums - For taxable years beginning in 2009, the limitation under S 213(d)(10), regarding eligible long-term care premiums includible in the term "medical care" are as follows:

40 or less: $320
More than 40 but not more than 50: $600
More than 50 but not more than 60: $1,190
More than 60 but not more than 70: $3,180
More than 70: $3,980

There are also tax changes for periodic payments received under Qualified Long-Term Care Insurance contracts or certain life insurance contracts.

For calendar year 2009, the stated dollar amount of the per diem limitation under S 7702B(d)(4), regarding periodic payments received under a qualified long-term care insurance contract or periodic payments received under a life insurance contract that are treated as paid by reason of the death of a chronically ill individual is $280.

Annual Exclusion for Gifts - For calendar year 2009, the first $13,000 of gifts to any person (other than gifts of future interest in property) are not included in the total amount of taxable gifts under S 2503 made during that year. Source: IRS Revenue Procedure 2008-66

To find a comprehensive online directory of over 3,000 insurance professionals who can assist with your long-term care insurance needs, visit the Consumer Information Center of the American Association for Long-Term Care Insurance.

Jesse Slome is Executive Director of the American Association for Long-Term Care Insurance. The industry trade organization does not sell insurance products but maintains an excellent website for consumers seeking additional information on the subject. If you would like to receive a no-obligation free quote from a member of the Association, visit our Consumer Information Center.

Answered at 3:49 PM on February 20, 2009

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What is Long-Term Care Insurance Sales - 30 Prospects in 30 Days?

Asked by karn singh in Personal Finance & Tax at 3:20 PM on February 20, 2009

Seema's Answer

Well, let's assume you can close one out of three of these prospects, that would yield 10 sales. At a modest premium of say $1,500 per sale, you might net $6,700 in first-year compensation. Do that consistently and add in renewals and you have yourself a pretty successful business.

But, here's where the plan comes to a screeching halt for most insurance agents. How much money are you willing to invest in marketing in order to achieve the results I've just shared? Would you be willing to spend $3,000, $4,000 or even more to build your business?

What if I told you it might take three or more months of commitment before results are achieved; would you be willing to implement an ongoing marketing plan. Chances are you'd say no. Don't feel bad, you're not alone.

A percentage of insurance professionals note that finding qualified long-term care insurance prospects is an obstacle to making more sales. I contend that there are more than enough interested prospects out there; they simply are not contacting you. And, the blame for that rests squarely on your shoulders.

Last year some 400,000 Americans purchased long-term care insurance protection. This year, the number will likely come close. There are ample prospects; we just have to make your phone ring. Here are three low-cost marketing programs to make that happen.

Focus On Year End Tax Deductibility:

While headlines talk about a struggling economy, many businesses are enjoying highly profitable years. And higher profits equal higher taxes.

Now is when many small business owners start to look at their company ledgers and begin the frantic search for ways to reduce their year-end tax liability. Long-term care insurance can provide just such an opportunity and chances are no one has raised the possibility. Or, it's the time when they realize they waited too long. Either way, it's the ideal time to communicate.

Now is the perfect time to communicate the tax-advantages offered to small business owners who purchase LTC insurance. Whether costs are fully tax-deductible or only partially deductible (up to stated limits) few owners will turn down the opportunity to have Uncle Sam share in the cost of their benefits package.

Mailings to clients who own small businesses or are self-employed is the lowest cost means of communicating this important message. Don't overlook calling local accountants and tax preparers to make certain they know the current tax-deductible limits and the rules for each type of business entity.

Target Women Living Alone

Everyone will acknowledge that long-term care is a woman's issue. Women live longer than men. They make up 70 percent of all nursing home residents and almost two-thirds of formal (paid) home care users are women.

But, long-term care is an even more important issue for women living alone. That includes those women who are divorced, widowed and those who were never married. It's a segment of the female population that is rarely addressed.

Women living alone face the double jeopardy of needing more long-term care and not having a spouse available to provide that care. They are very viable prospects once they understand the increased risk and, therefore, the increased need to plan.

From delivering free talks about long-term care planning before women's organizations, to writing articles for your local newspapers and specialty magazines, this is a vital message that you can deliver. It will resonate. It will make your phone ring.

Answered at 3:50 PM on February 20, 2009

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Long-Term Care Insurance - Two Questions to Ask Your Insurance Professional Before Buying?

Asked by karn singh in Personal Finance & Tax at 3:21 PM on February 20, 2009

Seema's Answer

With that in mind, I would like to share those questions and some explanation why each can save you money ... get you better coverage ... or even a combination of the two.

Question 1. Do you have access to policies from more than one company (and how many have you compared for me)?

There are between 40 and 50 different insurance companies today offering long-term care insurance policies. Each sets their own rates and depending on your age, health, marital status there can be quite a variance. For example, the Association recently requested rates for a 55-year-old from four leading insurers (Genworth, John Hancock, New York Life and Northwestern Mutual). These are all excellent companies.

There was almost a $1,000 a year spread (we won't tell you who was the highest because they could be the lowest had we changed some of the circumstances). But, this demonstrates the importance of having your insurance agent get rates from multiple companies. If they only have access to long-term care insurance from one company, they can't compare on your behalf. So you should.

Question 2. Do you think I can qualify for "Preferred" health discounts with the company you are recommending? If not, is there another company that to me?

Just as there are significant differences between what insurers charge, there are important differences between what health conditions they will find acceptable. Keep in mind that NOT everyone who applies for long-term care insurance gets accepted.

A preferred health discount can generally save you 10% each year. The best news is that once you qualify, the discount is not changed when your health changes (and it typically will).

Most agents today will not quote a rate showing a preferred health discount. They don't want to come back and tell you that you'll be paying more for protection. But some will. It's important to ask whether the rate they are projecting includes that discount. Or, if it doesn't ask them whether they think you might qualify for that savings based on their experience (you're not only looking for that information ... but to get a general sense of how much they really know about long-term care insurance).

These are probably the two most important questions you can ask. If you are comfortable with the answers, they sign away. If you are not, then you might want to see a second opinion. About two thirds of buyers today actually speak to more than one insurance professional before buying long-term care insurance.

Answered at 3:51 PM on February 20, 2009

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Long Term Care Insurance - What's the Best Age to Start Planning? ?

Asked by karn singh in Personal Finance & Tax at 3:21 PM on February 20, 2009

Seema's Answer

When it comes to planning for a sound financial future, young professionals building a career have much to think about. And, it's only natural to think of long-term care as something essentially for one's parents or grandparents. Nothing could be farther from the truth and regrettably many people put off gaining an understanding of the topic until it is too late. The analogy is waiting for a hurricane to hit your city before devising a plan to protect your home and family.

What Is Long-Term Care? Quite simply, long-term care refers to a broad range of medical and personal services and assistance that is provided over an extended period of time. Most people associate needing long-term care as a result of aging or a cognitive impairment such as Alzheimer's disease. But, many younger people require long-term care services following accidents. Typical ones you hear about are motorcycle accidents or falling off the roof while cleaning gutters.

The mention of long-term care also generally brings to mind images of a nursing home. Again, a false impression, as most long-term care today takes place in ones own home or a facility other than a skilled nursing care facility.

Who Pays for Long-Term Care? Generally speaking, any health insurance you may have on either an individual basis or through your employer only pays for doctor and hospital bills. As a result, most of the costs for long-term care are not covered by these plans. And, when you reach retirement age and qualify for Medicare, it's important to understand that Medicare pays little of the cost (if any) for long-term care.

So, who pays? Most often the individual receiving the care or their family members pay. Like medical expenses, long-term care can be equally costly - especially if you have to pay the entire cost from your own savings. Some 30 years ago, insurers began offering a form of protection called long-term care insurance designed to pay for qualifying care. Today, some eight million Americans - ranging in age from their 20s to their 90s own long-term care insurance protection. That number grows yearly.

What Does Insurance Cost? The cost of long-term care insurance is determined by certain factors. These include your age when applying for protection, the amount of benefit you are eligible to receive and whether you opt for protection that pays for care in your own home.

The younger you are, the less long-term care insurance protection costs. But, while insurance premiums generally increase about nine percent for each year you wait to apply, here is the most important fact younger people fail to recognize; one must health qualify for long-term care insurance. Your good health today can qualify you for significant yearly savings (similar to how good driving habits will reduce your car insurance). Perhaps more important, a change in your health -- even one that is not life threatening -- can cause you to pay as much as 20 percent more each year or make it impossible for you to qualify no matter how much you are willing to pay.

Long-term care insurance protection can be far more affordable than young people think. Leading insurance companies offer discounts to married couples that can reduce the cost by 40 percent yearly when both partners obtain coverage. An increasing number offer discounts for unmarried adults who are living together.

Some other ways to significantly reduce the cost is by adding a deductible period (referred to as an Elimination Period in long-term care insurance protection), choosing a limited benefit period (say one that pays benefits for three years versus one that provides unlimited coverage.

Can Insurance Be Tax Deductible? The short answer is, it can be -- especially if you own your own business. Recognizing that government programs do not adequately pay for long-term care insurance, federal and a growing number of stet tax codes now offer tax incentives to encourag

Answered at 3:50 PM on February 20, 2009

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How to Save Money on Long-Term Care Insurance?

Asked by karn singh in Personal Finance & Tax at 3:18 PM on February 20, 2009

Seema's Answer

This article is intended to provide some general information and suggest a two ways that you can make this protection far more affordable than you might think.

Take Advantage of Insurer "Sweet Spots"

The sweet spot on a tennis racket or golf club is the location where you get the most power from your stroke. With long-term care insurance, the sweet spot is where you get the most protection for the least cost.

Finding the sweet spot is especially important when you look for long-term care insurance. That's because your cost is generally set for the life of the policy (though this is not a guarantee). And, because it almost never pays to change policies or insurers down the road. Policy costs are based on your age when you apply and your health.

So, you want the best cost for the best protection from the get-go.

Each insurer sets their own rates based on the type of clients they seek to attract. The company with the lowest cost for a 55-year-old married couple, may not be the least expensive for a 55-year-old single individual or, for that matter, a 64-year-old married couple. For example, a recent comparison of rates from four insurers (Genworth, John Hancock, New York Life and Northwestern Mutual) for a 55-year-old found that virtually-identical coverage from Northwestern would cost almost $1,000 a year more.

There are two kinds of insurance professionals who offer long-term care insurance. Agents generally represent only one company (which may indeed have the best offering). Brokers typically are independent and can represent multiple carriers. They can shop the market.

An important question to ask whoever you contant is whether they will be comparing policies and how many they are looking at before recommending a solution.

Your Good Health Today Can Save You 10% to 20% Each Year

Drivers without accidents and tickets pay less for their auto insurance. Individuals with few or no current health conditions pay less for their long-term care insurance. Insurers generally offer a 10% deduction.

And, best of all, this good health (some call it preferred health) discount is locked in. That means, you don't lose the savings when your health changes. And, as you get older, it will change.

A study conducted by the long-term care insurance industry's trade organization in 2008 revealed the percentage of applicants who qualify for good health discounts. It's clearly to your benefit to start the process at younger ages, certainly while in your 50s.

Percentage of Applicants Who Qualify for Good Health Discount

Age of Applicant Average Who Qualify

Under 30 63.2%
30 to 39 66.3%
40 to 49 66.8%
50 to 59 51.5%
60 to 69 42.2%
70 to 79 24.2%
80 and Over 12.9%

Bottom line, an educated consumer always has an advantage when buying any financial product. Long-term care insurance is offered by between 40,000 and 50,000 insurance agents, financial planners and stock brokers. They should be willing to provide cost comparisons and explain ways you can save without any obligation. After all, it's in your best interest ... and theirs.

To find a comprehensive online directory of over 3,000 insurance professionals who can assist with your long-term care insurance needs, visit the Consumer Information Center of the American Association for Long-Term Care Insurance.

Answered at 3:46 PM on February 20, 2009

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When it Comes to Long-Term Care, The Time to Plan is Now?

Asked by karn singh in Personal Finance & Tax at 3:19 PM on February 20, 2009

Seema's Answer

If you're like most people, your plans for retirement include spending more time with your family, traveling, or catching up on hobbies and activities that have been put on hold during your working years. And, like most people, you've probably put money aside to fund your retirement. But what if your retirement suddenly includes an unexpected long-term care need?

A recent survey by Americans for Long-Term Care Security indicates that more than 50% of the U.S. population will require long-term care at some point in their lives. And, with advances in medical technology and healthier lifestyles, people are living longer than ever before.

The government has made it clear; it cannot afford to fund the nation's long-term care costs. In fact, Congress tightened the financial requirements to qualify for Medicaid, the federally and state-funded program for those who live at or below the poverty level. And, recently rolled out a nationwide long-term care awareness program called "Own Your Future" which encourages people to better understand and plan for long-term care.

All of this can certainly present a significant challenge, but there is something you can do. Plan now.

Fortunately, many private insurance carriers are offering long-term care insurance-insurance designed to cover your care expenses should you find yourself in need of assistance. Although each policy has its own particular features and benefits, they do share some common characteristics. By learning what to look for now, you can better plan for the possibility of needing long-term care in the future.

Basically, long-term care insurance is designed to reimburse you for some or all of your expenses when you need long-term care services. Most policies let you select how much money the policy pays you on either a daily or a monthly basis. Long-term care insurance policies also include an elimination period or waiting period (think of this as a policy deductible) that you must satisfy before benefits are payable.

You also need to consider where you want to receive care. Many policies will cover care wherever you need it - whether that is at home, in a nursing home or in an assisted living facility. By selecting a policy that offers coverage for several different types of care, you ensure control over your future. A comprehensive policy ensures you can maintain your independence and control over how and where your care is received.

The last major point to consider is how much care costs in your area. Just like the price of a house, the cost of long-term care varies between different cities and states. According to a recent study by the MetLife Mature Market Institute, the national average rate for a private room in a skilled nursing facility was $206 per day or $75,190 annually in 2006.

With so many variables in each plan, and so many plans available, it's nearly impossible to make an educated decision without seeking the advice of a qualified expert. But it's clear that the need for long-term care is real, and one that could potentially threaten even the best laid retirement plans. By taking the time to act now, you could avoid a costly mistake in the future.

Answered at 3:47 PM on February 20, 2009

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Is Insurance For Long Term Care Too Expensive? ?

Asked by karn singh in Personal Finance & Tax at 3:20 PM on February 20, 2009

Seema's Answer

Is insurance for long term care too expensive? It's a common question, one that typically comes after, "Is long term health care insurance necessary?" LTCI may not be cheap, but before we start bashing the costs of LTCI, let's look at some of the numbers and what we can expect to pay without any type of insurance. Any idea how much you may pay annually to stay at a nursing home - $70,000 a year! An assisted living facility may run upwards of $30,000...and that may be the cheapest option! Home health care? Do you have an extra $66,000 to spend?

Not everyone needs long term health care insurance, but regardless, understanding the costs and structure of long term care are crucial to better understanding this complicated form of insurance. It can be difficult to find out how much LTCI is going to cost. Adding to the difficulty, is the fact that there are lots of factors that can impact a LTC quote and what your premiums will actually end up being. Below we've listed some estimates of what you can expect to pay based

Keep in mind that the cost for long term health insurance will vary by state. Make sure to contact a long term care insurance specialist for a more accurate quote in your location. Based on a study completed back in 2006, the average cost of a private room in a nursing home was a staggering $70,000 PER YEAR! If we assume an inflation rate of around 5% per year, these numbers may triple over the next 20 years. Yikes.

So what can you expect to pay for long term care insurance now? Below you will see some figures that will allow you to estimate monthly premiums from some of the top providers, based on your age at the time of application for LTC insurance coverage. These are only estimates, and actual premiums will vary. Again, to get a more accurate estimate, make sure to contact a specialist in your state.

Answered at 3:48 PM on February 20, 2009

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When it Comes to Long-term Care, What Are You Waiting For?

Asked by karn singh in Personal Finance & Tax at 3:19 PM on February 20, 2009

Seema's Answer

So, what are your options? Many people think the government will take care of them, but unfortunately that isn't the case. In fact, Congress has tightened the financial requirements to qualify for Medicaid, the federally and state-funded program for those who live at or below the poverty level. And Medicare is designed to cover acute illnesses like hospital stays and doctor's visits, not long-term care. And, the government recently rolled out a nationwide long-term care awareness program called "Own Your Future" which encourages people to better understand and plan for long-term care.

It's clear that the average person will be responsible for covering long-term care expenses privately. But, according to a MetLife Mature Market Institute Study, the national average cost of private Nursing Home stay was $206 per day or $75,190 annually in 2006. Coming up with that kind of money, on top of other daily expenses, could prove difficult for many people. Fortunately, many insurance carriers are offering policies developed specifically to provide funding for long-term care.

Enter long-term care insurance policies. Basically, long-term care insurance is designed to pay a daily, monthly reimbursement or cash benefit when you need long-term care services.

Each plan has different bells and whistles, but they do have several similar characteristics. One of the most important is that the older you are, the higher your premiums will be, and the more difficult it is to qualify for coverage. A policy that is affordable in your 50s will be more costly if you wait until you are in your 70s. And, if your health deteriorates, you might not qualify for coverage at all.

You also need to consider where you want to receive care. Many policies will cover care received at home, in a nursing home or in an assisted living facility. By looking at a comprehensive policy that offers coverage for several different types of care, you are ensuring control over your future choice of how care services will be provided.

Most policies also include an elimination period or waiting period (think of this as a deductible) which must be satisfied before benefits are payable. In much the same way selecting a higher deductible on your health insurance will save you a few dollars, selecting a longer elimination period is one of the ways you can lower your premiums. Of course, in both situations, you will likely spend more money out of pocket.

With so many variables in each plan and so many plans available, it's nearly impossible to make an educated choice without seeking the advice of a qualified expert. But what is clear is that the need for long-term care is real, and it could potentially threaten your other retirement plans. By acting now, you will be better equipped to decide how to handle the possibility of a future long-term care need.

Answered at 3:46 PM on February 20, 2009

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