Long Term Care Insurance

Many people are confused of whether or not to get long-term care insurance. Most people think that they won’t need such insurance since they have personal savings to cover the costs, unaware of the drawbacks that could fall on their finances and lifestyle.

Here are some of the FAQs you need to know about long- term care insurance:

Who should buy long term care insurance (LTCI)?

Anyone who wants to protect his or her savings against the high costs of long-term care should consider purchasing LTCI.

One troubling misconception that stuck on people’s mind is that long-term care is barely needed or it won’t be needed at all. Most people are also hesitant to plan for their long-term care for the belief that there are alternatives in everything. It’s only when they realize the benefits of LTCI when they learn that their health insurance or Medicaid only covers the first few weeks in the chosen facility.

Long-term care can be needed by anyone of no matter what age or health. At any given moment, the long-term care landscape in America can change: Anyone between the ages 18 and 1044 may need this type of care, however, the elderly do comprise most of nursing beds.

The verdict goes to the uninsured. They run the risk of losing their lifetime assets for a year of stay in long-term care facility. The adversities may come in between as your children and heirs will be ones to suffer your worst financial mistake. So the best way to dodge those unlikely events is by securing yourself with long-term care insurance.

How much does it cost?

There is no one-size-fits-all policy. The policy normally depends on the person’s age, health, and residence.

People with good health history can save from the premiums compared to those with medical records. For instance, a person with Alzheimer and other chronic illness will need more care and so the policy should cost higher. The price also varies from state to state. The rates in metropolitan areas are obviously higher than the rural counterparts

Older policyholders receive much expensive premiums, but it is always more practical than paying out-of-pocket expenses.  People who thinks that LTC insurance is expensive don’t realize how much he or she will have to shell out from personal savings.

Who should not buy long-term care insurance?

• Those with no means of paying the coverage.
• Without assets to protect.
• Without family to pass their assets may need not apply for long-term care insurance.

Some people with chronic illness feel that they won’t qualify for coverage due to their health condition. However, the only way to find out if you are qualified is to apply and see if you still qualify. There’s no harm trying.

A single person with no family assumes he/she doesn’t need coverage, but if he/she owns assets and needs care, LTCI will be needed.

How much nursing home costs?

In 2008, the average cost of nursing home care nationally was $75,000 per year. The costs differ in the statewide level. A private room in a nursing home in some communities amounted up to $385 a day the same year.

The prices for nursing homes increase every year. So how could an uninsured retain his or her assets without LTC insurance? Not only the nursing homes are expensive but also the home care. The rates for home health aides rise every year, making it depressing for the uninsured to cover the costs from personal finances.

Does Medicare pay long term care?

Unfortunately, only a small portion of long-term care expenses will be covered by Medicaid. You have to reach the poverty level first before qualifying for coverage. You must have $2000 total assets, with no car, home, and personal resources.

Annuity With Long Term Care Benefits

A popular alternative to standard LTC insurance and refered to as a linked benefit product.

Are you looking for a way to leverage your investments to include protection from the risk of expensive long term care? Have you been turned down (declined) for long term care insurance or does you health prevent you from applying for long term care insurance?

If you answered yes may want to consider an alternative to spending down your own nest egg to pay for long term care.

There are two types of annuities with long term care benefits. One requires health underwriting and one does not. Both are single premium fixed annuities with a long term care rider designed to cover long term care expenses.

The annuity with no underwriting provides access to long term care benefits without depleting your principal, you avoid invasive medical questions, and you can pay for in-home care.

Both annuities will provide you with financial security and long term care peace of mind with extended care protection. The annuity with underwriting will have better leverage (benefits) than the annuity without underwriting, but if you cannot health-qualify your only choice is the annuity without underwriting.

How it Works

A Hybrid Annuity contract with a Long Term Care rider will typically have a maximum monthly benefit based upon the Account Value at the time of the first benefit claim payment.  The Account Value at that time will define the initial lifetime benefit amount for the Initial Benefit Rider (IBR).  The initial lifetime benefit amount for the Extended Benefit Rider (EBR) is typically a multiple of the IBR lifetime amount.

The maximum monthly (or daily) benefit amount is derived when the initial lifetime benefit amount is established by dividing the initial lifetime benefit amount (the account value) by the number of selected benefit periods for the IBR rider.  The maximum monthly (or daily) benefit amount for the EBR will be the same as that calculated for the IBR maximum.

The benefit period for the EBR is typically derived based upon the multiple associated with the selected EBR.  An example follows:

Account Value at the time of the first benefit claim payment = $150,000
IBR Benefit Period chosen                                                            24
IBR Lifetime Benefit                                                          = $150,000
300% EBR chosen                                                                
EBR Lifetime Benefit                                                         = $300,000

Maximum monthly benefit  =  $150,000 / 24 = $6,250
EBR Benefit Period derived = $300,000 / 6250                    =          48

As claim payments are made, the account value is reduced by the full amount of the payment.  If less than the maximum benefit amount is paid, then the benefit continues until the aggregate lifetime benefit amount is paid.

Once the Initial Benefit Amount is depleted, the Long Term Care benefits stop unless you had purchased the Extended Benefit Rider (EBR). This benefit initiates the Long Term Care insurance component.

These contracts also typically provide for cost of living or scheduled increases.