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Long Term Care Awareness Month

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November is Long Term Care Awareness Month… a continuing effort to raise public awareness regarding the importance of long term care planning. Consider this: 3 out of every 4 people who live past age 65 will need some sort of long-term care support, according to the US Department of Health and Human Services.  A stroke, a broken hip, Parkinson’s, simple frailty from aging – these are just a few examples.

The single biggest health issue requiring long-term care is that of Alzheimer’s and/or dementia. More than 50% of all long-term care insurance claims are related to a cognitive issue such as these. The Alzheimer’s Association 2014 Facts and Figures reports:

  • Alzheimer’s disease is the 6th leading cause of death in the United States
  • The disease kills more people than breast and prostate cancer combined
  • More than 5 million Americans are currently living with Alzheimer’s
  • 1 in 3 seniors dies with Alzheimer’s or another dementia
  • Almost 2/3 of Americans with Alzheimer’s disease are women
  • Women age 60 and older have a 1 in 6 chance of getting Alzheimer’s, men: 1 in 11
  • Women in their 60s are about 2 times more likely to develop Alzheimer’s than breast cancer at some point in their remaining years
  • More than 60% of Alzheimer’s and dementia caregivers are women
  • The average Alzheimer’s patient requires 24-hour care for an average of 4-7 years

Long term care includes a range of services to assist you when you suffer from a chronic or prolonged illness or disability (Alzheimer’s, Parkinson’s, stroke, cancer, accidents and much more) that leaves you unable to care for yourself for an extended period of time.

It is not just medical care, but is considered custodial care – care that is generally needed when you are unable to perform certain ‘Activities of Daily Living’ – bathing, eating, walking, getting dressed, etc. Services may be provided in nursing homes, assisted living facilities or a patient’s own home.

Long-term care is poised to become an important issue in the U.S. as the nation’s population grows older.  Each and every day, over the next two decades, 10,000 Americans will celebrate their 65th birthdays and as many as 70 percent of them, at one point as they grow older, will need some level of assistance with every day necessary chores.

When you stop and think about it, the decision not to buy long term care insurance is a decision to self insure. This can be costly and possibly devastating.  The average cost of a nursing home today is $80,000 per year and rising. At that rate, it doesn’t take but a few years to grind through a modest estate.

Until recently, consumers had few choices when it came to long term care insurance. Traditional policies, which provided a certain amount of selected coverage, were the norm.  If the policy was never used, the owner would lose the investment of his or her premium payments.

The Solution: The Long Term Care Insurance That is Not a Policy!  These new products, long term care annuities, provide the option to receive long term care benefits only if they are needed. There is no separate long term care insurance policy, no premiums and generally little or no underwriting.

In response to customer and agent demand, insurance companies have designed what can be best described as hybrid or linked policies. These policies combine the benefits of an annuity or life insurance agreement with a traditional long term care contract.

With hybrid policies, the consumer has the guarantee of long term care benefits or, if no care is needed, the promise of insurance benefits to themselves and their beneficiaries.

The newest addition to the hybrid marketplace is the long term care annuity. This product also functions exactly like a fixed annuity, but has a long term care multiplier built into the policy. There is no premium rider attached to this medically underwritten annuity policy. Instead, a portion of the internal return in the contract is used to pay for the long term care benefit.

A Long-Term Care rider provides long term care insurance in addiction to a steady stream of income. The 2006 Pension Protection act now allows for withdrawals from an annuity or life insurance policy with a long term care rider to be tax free to the individual for qualified long term care expenses.

  • Please Note – Applies to non-qualified money – Your money is used first.

Long term care coverage is calculated based on the amount of coverage selected when the policy is purchased. The insurance company offers a payout of 200% or 300% of the aggregate policy value over two or three years after the annuity account value is depleted.

For example, a policyholder with a $100,000 annuity who had selected and aggregate benefit limit of 300% and a two year benefit factor would have an additional $200,000 available for long term care expenses after the initial $100,000 policy value was depleted.

The policy owner would spend down the $100,000 annuity value over a two year period and then receive the additional $200,000 over a four year period or longer. In this example the contract pays $50,000 a year for a minimum of six years, but care will last longer if less benefit is needed.

Again, if long term care is never needed the annuity value would be paid out lump sum to any named beneficiary.

Long term care planning for you and your family is an important strategy for protecting your financial future. Regardless of whether or not insurance is utilized, the out-of-pocket costs for care can be a heavy financial burden.

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Tuesday, October 28th, 2014 Wealth Management

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