In our last blog we discussed the rising costs of Long Term Care Insurance (LTCI). In this article, we would like to point out the importance of this insurance to drive home the point that if you are in the age bracket where the premiums make economic sense for you, then you should definitely consider adding this insurance into your portfolio.

Did you know that people spend on?

1. Home Insurance where there is a 1:1200 chance of the home being destroyed
2. Car Insurance where there is a 5:1200 chance of the car being totaled
3. Health Insurance where there is a 105:1200 chance of ever needing hospitalization;

BUT, they don’t purchase LTCI early enough when the premiums are affordable even though there is a 720:1200 chance that a person will need long term care during his or her life? There are significant benefits that are available when an individual already has LTCI:

• The ill spouse can delay or avoid getting institutionalized since he or she has the ability to remain at home and pay for additional care at home
• The ill spouse can receive 14 more hours per week of care that would have otherwise been available to him or her
• Depending on the length of coverage for the LTCI, the ill spouse has time to spend down assets thereby protecting these assets for the ultimate beneficiaries
• LTCI saves the average nursing home resident an additional $100k per year thereby reducing the out of pocket expenses since the average claimant spends approximately $11250 in premiums or 15%-20% of the total amount of expected benefits
• Finally, there is less stress on the family and less time off from work taken by the family members to provide for care

BEST TIME TO BUY, WHO SHOULD BUY LTCI AND WHAT SHOULD YOU LOOK FOR

The best time to buy is between the ages of 65 & 69 for those with assets between $200k & $1.5 million. If you have fewer than $200k in assets, then you probably don’t need LTCI and if you have more than $1.5million, you can probably afford to pay for care privately. A policy that will cover 4 or 5 years is ideal and look for those that have a 30 day elimination period[1] as well as which premiums are below 20% of your disposable income after all the essential bills have been paid. Also watch out for hidden provisions that increase your rates. Federal laws protect against rates being increased on an individual basis – rather the rate must increase for a class of people as a whole.[2]

[1] longer the elimination period, lower will be your premiums and so a 100 day elimination period may be okay for you if you have Medicare and/or Medi-gap to cover the first 100 days

[2] Summary taken from Representing the Elderly Client by Thomas D Begley, Jr. and Jo-Anne Herina Jeffreys