| In the next few minutes you will learn about | | | | |
| a new insurance industry product that | | | | The insurance industry is very competitive. |
| provides long term care insurance coverage if | | | | This very competition engenders new thinking |
| you ever need it, but requires no policy, | | | | and creative policies. Enter "Long Term Care |
| premiums or health qualifications. | | | | Annuities." |
| | | | |
| Why Seniors Don't Buy Long Term Care | | | | There are only a few companies offering this |
| | | | product and the structure differs from |
| 1. In my experience, over half the people who | | | | company to company. To give you a general |
| shun long term care insurance do so because | | | | overview of the concept and mechanics, I am |
| they feel they will never need it. It is | | | | going to describe the main aspects of one |
| difficult to visualize going to a nursing | | | | carrier's contract. Check with your financial |
| home. Statistically, half of these people | | | | planner for all the options. |
| will be right. | | | | |
| | | | The underlying base of an "LTC annuity" is an |
| However, there are a number of scenarios | | | | annuity. Nothing new here; annuities have |
| where the person may need some kind of | | | | been around for a hundred years. They are |
| assistance but never see the front door of a | | | | safe, the funds accrue at a competitive |
| nursing home. In fact, most people who need | | | | interest rate, and the account grows |
| long term care can receive care without ever | | | | tax-deferred. |
| leaving their home. | | | | |
| | | | To form an LTC annuity, the insurance company |
| When you stop and think about it, the | | | | has built in a "long term care option." It is |
| decision not to buy long term care insurance | | | | not a rider. There is no premium. It is |
| is a decision to self insure. This can be | | | | simply an option you elect if long term care |
| costly and possibly devastating. | | | | is ever needed. Sweet. |
| | | | |
| The average cost of a nursing home today is | | | | To qualify, a person only needs to lose two |
| $80,000 per year and rising. At that rate, it | | | | of six ADLs (activities of daily living). |
| doesn't take but a few years to grind through | | | | ADLs are insurance companies' method of |
| a modest estate. If both the husband and wife | | | | determining the qualification for levels of |
| need nursing home care, the time to dissipate | | | | care. They are eating, bathing, dressing, |
| an estate is cut in half. | | | | toileting, transferring (walking) and |
| | | | continence. |
| A person can spend 40 years in a career | | | | |
| building a retirement nest egg. They spend | | | | The person doesn't have to be in a nursing |
| another 40+ years conservatively managing | | | | home. They simply need to have demonstrated |
| their money while trying to keep up with | | | | the inability to perform two of the six ADLs |
| inflation. If they need to go into a nursing | | | | to qualify to put the long term care option |
| home during the last five years of their | | | | in their annuity in action. |
| life, it all could be gone quickly. | | | | |
| | | | An Example |
| It doesn't have to be that way as you will | | | | |
| soon see. | | | | If a male, age 60, places $200,000 into an |
| | | | LTC annuity, assuming a conservative interest |
| 2. Many people think long term care insurance | | | | rate, the policy would grow to $300,000 in |
| is too expensive. They may be right. | | | | ten years. If the $300,000 were converted |
| | | | into a life income, the person would receive |
| If a person waits too long to apply, they may | | | | $2,200 per month for the balance of their |
| have sticker shock. The rates are based on | | | | life. An 8.8% return. Not too bad, |
| age. | | | | considering it is guaranteed no matter what. |
| | | | |
| However, long term care comes with a lot of | | | | If this person needs long term care at age 70 |
| bells and whistles. When you strip away some | | | | by virtue of losing two of six ADLs and |
| of the options that may be nice to have, but | | | | elected the long term care option, the life |
| not essential, the premium is a lot lower. | | | | income would jump to $4,500 a month. |
| | | | |
| If a person looks at a plan that covers home | | | | Conclusion |
| health care only, the premium is lower yet. | | | | |
| This takes care of the 50% who never will | | | | These new products, long term care annuities, |
| need to go into a nursing home. | | | | provide the option to receive long term care |
| | | | benefits only if they are needed. There is no |
| The only thing better is coverage without a | | | | separate long term care insurance policy, no |
| premium, which I will get to in a minute. | | | | premiums and generally little or no |
| | | | underwriting. |
| 3. Most people react to a problem only when | | | | |
| the problem surfaces. If a person waits to | | | | Now there are no excuses. Those who feel they |
| apply for long term care insurance until they | | | | will never need long term care will simply |
| are experiencing health problems, any long | | | | never exercise their LTC option. Those who |
| term care insurance plan may be prohibitively | | | | find long term care too expensive have an |
| expensive or altogether unavailable. | | | | alternative with no premiums. Moreover, those |
| | | | who have health issues can obtain long term |
| The Solution: The Long Term Care Insurance | | | | care benefits, as underwriting is simplified |
| That is Not a Policy | | | | or non-existent. |