Monthly Archives: June 2014

Why Women Pay More for Long Term Care Insurance

In the past year, consumers have watched Long Term Care Insurance providers roll out new products with new pricing models that usually cause some questions. One of the main questions that arises when people see the changes to some of the latest policies is: why do women pay more for Long Term Care Insurance?

Gender Based Pricing

Most of the bigger Long Term Care Insurance providers have now implemented pricing models that include gender based pricing. In other words, women pay more for a policy than men do. This price structure is practically brand new and isn’t for no reason. While some women may cry foul and accuse insurance companies of being unfair, the reality is, it’s the old prices that were unfair, not the new.

The principle that sets the entire foundation of insurance is risk. Every component of insurance is based on risk, from the actuarial tables to the underwriting standards to the premium rates. Since the Long Term Care Insurance industry began in the 70s, companies have wised up as to who poses a higher risk than others and they adjusted accordingly.  Women, unfortunately, fall into that category and are now facing the consequences.

Women Are High Risk

The average lifespan for women in the United States is 81 years, compared to just 76 years for men. It is a fact of life that women live longer than men and it should come as no surprise to any one. It makes sense, then, that their chances of needing long term care in their senior years are much higher, too.

Not only do women have more years of life during which they can develop the need for assistance in life, they are also more likely to be widowed. If men need care, there is a good chance their wives will be around to provide it. By the time women need help, their husbands are often deceased and unable to provide the care the wife needs. The disparity explains why women make up 70% of all long term care claims. On top of that, they account for around 80% of all nursing home residents.

Looking at Policies

Insurance companies have gotten wind of these statistics and understand the gap in risk between men and women. Subsequently, they raised premium rates for women to take into account the higher chance of a claim. The higher rates don’t apply to married women, though, because spousal pricing usually applies. Single women, on the other hand, are the ones who are hit the hardest by this new pricing model. Because they have no partner to turn to should they need care, they pose the highest risk to Long Term Care Insurance companies. Therefore, they pay the highest base rates.

This kind of pricing is no less fair than auto insurance pricing that jacks up the rates for teen boys or life insurance pricing that increases the rates for men. Insurance is based on risk, so adjusting for risk is an inevitable part of a growing and learning insurance market. To learn more about Long Term Care Insurance and whether or not it is right for you, click here.

Will Health Care Costs Force You to Spend More in Retirement?

You’ve established your retirement plan, nailed down your target goals, and are working towards your numbers. Suddenly, you’re faced with a big medical expense that you aren’t prepared to pay for, and you aren’t sure what to do.

What’s Your Plan?

Leaving the workplace brings about all kinds of changes, many of them financial, and planning ahead for each and every one of them can be tough, but it’s worth the effort in the end. Health care expenses in retirement can be huge and if you haven’t developed a plan ahead of time, can leave you in a bad spot when it comes to finances.

Say you were to enter retirement and a couple years later, you suffer a bad fall and break a bone. With the injury and the accompanying frailty, you are now unable to complete all of the tasks you would otherwise be able to, which means you need long term care. Where do you begin? Do you have a plan in place to cover these types of costs, or was your plan to just wing it?

Health Care Expenses

Fidelity Investments released their annual Retiree Health Care Cost Estimate for 2014 recently and the estimate is right on par with the estimate last year. The average 65-year-old couple retiring this year should expect to spend an average of $220,000 on out of pocket health care expenses during retirement.

That estimate assumes both individuals are eligible for Medicare coverage. Something the estimate doesn’t assume? The cost of long term care. If you do happen to need long term care, which an estimated 7 in 10 seniors will, you should expect to pay much more for your health care.

One year of care in a nursing home currently averages more than $87,000, according to Genworth data. One year of home health care is a little more than half that, just topping $45,000. Even if you don’t need nursing home care, the cost is still massive and can take a huge toll on your assets. So, let’s think hypothetically again. If a medical or health emergency were to arise that required you to receive some sort of long term care, would you be prepared to cover the cost or is there still room for improvement when it comes to your long term care planning?

Planning for Long Term Care

Planning for long term care doesn’t have to involve a huge percentage of your assets; instead, you can use a portion of the interest earned on your investment savings to cover the cost of a policy. If you have a pension, you can use your pension to pay for your premiums, as well. Medicare and traditional health insurance won’t cover the cost of long term care, so it’s up to you to look out for yourself.

Long Term Care Insurance can help you do that by providing you with a separate benefit pool to pay for your care in the future. A long term care policy provides you with the financial security every one seeks in retirement and gives you peace of mind that your nest egg won’t be spent on nursing home care.

It’s impossible to know what kind of health issues we may be facing in retirement. As much as we would like it to, our health now doesn’t definitively dictate our health in the future, so it’s wise to plan for some road bumps along the way. Read more about shopping for Long Term Care Insurance and how to find the best policy that fits your needs.

 

Buying Long Term Care Insurance: What You Need to Know

Shopping for Long Term Care Insurance, just like shopping for any insurance, can be difficult. All the different companies, policy options, and benefit choices can be confusing for someone who isn’t sure exactly what they are looking at, but it doesn’t have to be that way.

Long Term Care Insurance can help provide you financial assistance in a time of serious need and preserve your assets at the same time, so it shouldn’t be overlooked or put off because of the buying process. The fact is, 7 in 10 American seniors will need long term care at some point, and a very small percentage of those seniors have long term care coverage. Buying a Long Term Care Insurance policy can put you ahead of the majority and in a place of financial security should the need for long term care ever come about. There are a few basic tips that can help you have the simplest and most rewarding shopping experience possible, so read our suggestions below.

1) Begin browsing early

Chances are if you ever need care, you won’t need it until your 60s, 70s, or 80s, but that doesn’t mean you should wait until then to buy it. On the contrary, the longer you wait to buy, the lower your chances of medically qualifying for a policy. By the time you have a need for care, it’s much too late to apply. Instead of procrastinating the purchase, start looking at policies in your late 40s or early 50s.

Get a good idea of your options and make sure you understand the differences between them all before you lock down and choose one. The best time to buy a policy is in your early 50s because age and health both have a big impact on the premium rates you receive. The younger and healthier you are, the lower your rates will be.

2) Look only at blue chip companies

As tempting as it may be, we don’t suggest buying from a small, local agency or anything of the sort. The biggest companies are the best for a reason; they have knowledge of the topic and experience and data to back it up. When you buy a policy from a blue chip company, there is almost no question that your claim will be paid should you ever submit one. If you buy from a smaller, lesser known, lower rated company, you may run the risk of running into problems when it comes time to submit a claim.

The large insurers have had time to adjust their actuarial assessments, change premium rates, and alter other estimates over the years in order to produce the best Long Term Care Insurance product. It’s always best to buy from a blue chip carrier. Buying from an independent agent who works with all the major companies is your best bet.

3) Choose Inflation Protection

Once you’ve decided on a policy, you must choose the additional riders that will go along with that policy. Truth be told, there is really only one rider that every person buying this insurance needs and that’s Inflation Protection. WIthout Inflation Protection, your policy is just another poor investment. There is no telling how much long term care will cost 20 or 30 years down the road, but Inflation Protection raises the value of your benefits to keep pace with inflation, ensuring your benefits don’t lose value over time.

When you look at the numbers, Inflation Protection will cost you more up front. In just a short time, though, the benefit’s growing value will have made the cost well worth it. Buying a policy without it simply isn’t a smart move.

Long term care brings about all kinds of unknowns, but fortunately, with Long Term Care Insurance, how you will pay for care doesn’t have to be one of them. Read more about the basic components of Long Term Care Insurance or find out if a policy is right for you here.

Medicare and Long Term Care

With 10,000 Americans turning 65 years old every day, it’s not hard to see why the nation is facing growing health care costs. As the senior population grows larger than it’s ever been, planning for those health care costs has become a vital part of creating a successful retirement plan. Sadly, many Americans are confused about who covers long term care and think they are off the financial hook.

Americans Confused about Who Pays

A recent AP survey looked at Americans’ attitudes and plans for long term care. As it turns out, many are confused about the role that Medicare plays and wrongly believe they can rely on the government program for long term care. 42 percent of Americans over the age of 40 think Medicare pays for long term care in a nursing home and 38 percent think Medicare pays for long term care received at home by a home health agency. These numbers are discouraging because they highlight the lack of awareness surrounding long term care in the country.

Close to half of Americans are not planning for the cost of nursing home care because they think the government will pay for it. The truth is, Medicare will only cover the cost of long term care in a nursing home facility if you meet a specific requirement. You must be admitted to the hospital as an inpatient and have your inpatient stay last at least 3 days. Even then, if you meet the inpatient requirement, the program will only foot the bill for a very short period of time, a maximum of 30 days in most situations.

Looking for Help

If you can’t rely on Medicare, what can you rely on? Medicaid is the primary payer of long term care in the United States, but in order to qualify for benefits, you must spend your assets down. Your cash assets must be spent down to $2,000 to be eligible for Medicaid and most people don’t want to deplete their hard earned assets to pay for care they desperately need. That’s why family caregiving is emerging as such a huge part of the long term care equation.

People aren’t ready to foot the bill on their own, so rather than exhaust their nest egg on care, they rely on family members or friends to provide their long term care. Asking your loved ones to assist you with basic daily tasks like bathing, dressing, and toileting isn’t exactly in the majority of Americans’ retirement plans, though. Adult children are also spread across the country in this day and age, meaning it is much more difficult in the modern day to depend on family members for care without expecting them to make huge sacrifices.

Making Your Own Plans

It’s not uncommon for people to wait to plan for long term care until the need for care arises, but doing so will leave you with few options, none of them ideal. Rather than be slapped with sticker shock of the cost of long term care or burden your family with your daily care, you can plan ahead for the cost by purchasing Long Term Care Insurance.

Long Term Care Insurance is designed to protect your assets by covering the cost of your long term care if you meet certain requirements. The requirements usually involve you being unable to perform activities of daily living on your own. Once you have met the requirements, you can make a claim and the Long Term Care Insurance carrier will help pay for at least the bulk of the cost of long term care. Depending on the daily benefit amount you choose, your policy may or may not cover the full cost of care.

The bottom line is, unless you are ready to spend down all your retirement savings, you can’t rely on Medicare or Medicaid to pay for your long term care. You need to plan for it yourself. Learn more about your risk of long term care or find out if Long Term Care Insurance is right for you.

The Basic Components of Long Term Care Insurance

If you’re thinking about buying Long Term Care Insurance, chances are you know what it does. Long Term Care Insurance is designed to shield assets from the rising cost of long term care, which often causes sticker shock to those who are paying out of pocket. Long story short, long term care is not cheap. Far from it, actually, and the cost is growing annually. If you understand the financial risk posed by long term care, it’s likely that Long Term Care Insurance is on your list of things to buy.

So, you know what a policy does, but do you know how it works? There are a few basic components of a Long Term Care Insurance policy that are crucial to understand and be aware of before you make the decision to buy.

1)    Benefit period – The benefit period is the length of time that your policy is slated to last. Typical choices include 3 years, 5 years, and 10 years. Unlimited benefit periods were once an option in the past, but no longer. They were simply not profitable for Long Term Care Insurance providers who found they were taking heavy losses on these types of policies. A few insurance providers still offer 10 year benefit periods, but most have cut the maximum down to 5 years. Choosing your benefit period, like the rest of the components, is crucial to how much your policy will cost. Industry data has found that about 85% of claims last less than 5 years, so a 5 year policy is enough to hedge against the majority of the risk. A 3 year benefit period is a good option, too, if you are trying to make the policy more affordable but still shield from the main risk.

2)    Elimination period – The elimination period is essentially the deductible of your Long Term Care Insurance policy. The elimination period signifies how many days of care you must receive before your insurance benefits kick in. You usually have the option to choose between 0 and 180 days. 90 days is the most common choice because most people can afford to pay for 90 days of care without making any huge changes to their lifestyle. Once the 90 days are up and you are still in need of care, you will begin to receive your benefits from the policy. The elimination period, like most deductibles, has a big impact on how much your policy costs. If you think you can afford to pay for care for longer, you may want to lengthen the elimination period to help shave off some cost off of your premium rates.

3)    Daily benefit amount – The daily benefit amount indicates how much monetary value of care you will receive every day. The average daily cost of care varies by geographical region and city, so it’s crucial to research how much care costs in your area before deciding on your specific daily benefit amount. The average daily benefit amount is $150 per day, but it is significantly more expensive in the Northeast and on the West coast.

Familiarizing yourself with the moving parts of a Long Term Care Insurance policy can help you decide what kind of policy you want and how much you are going to pay for that plan. Other factors that influence cost are your age and your health, so buying when you are younger and still in good health is always the best option. The best time to purchase a policy is when you are in your 50s. Waiting until your 60s will cost you significantly more and can possibly rule out your chances of qualifying for a policy, depending on your health.

To learn more about Long Term Care Insurance and how to know whether or not a policy is right for you, click here.

Is Long Term Care Insurance Right for You?

Estimates of who will need long term care place the risk at about 50% for the general population in the United States. Of all men, women, and children of all ages, around half will need assistance with certain activities as they age.

What are the Chances?

Once you reach age 65, the chance of needing long term care hits 70%. So for every 10 American seniors, 7 will need long term care. Only around 8% of US seniors have long term care coverage, though, which begs the question, who is Long Term Care Insurance right for?

Long Term Care Insurance is designed to protect financial assets from the high cost of long term care, which is only growing every year. Genworth Financial, one of the largest Long Term Care Insurance providers in the nation, compiles a Cost of Care Survey every year. This year’s survey found that the median cost of nursing home care for one year now runs more than $87,000.

Paying for Care

Most people can’t afford to absorb that kind of cost without either depleting their asset portfolio or making huge changes to their lifestyle, neither of which is ideal. Rather than do either of those or turn to a family member for care, another situation that is less than optimal, individuals with Long Term Care Insurance can draw down from a separate pool of wealth created by their policy to help pay for care. So, deciding whether Long Term Care Insurance is right for you really isn’t all that difficult.

If you have a retirement nest egg to protect, have the desire to leave a legacy to your children, or simply want to avoid burdening your children or spouse with the responsibility of your care, Long Term Care Insurance can provide the tools you need to help you do just that. If you have little assets and know that you will be able to qualify for Medicaid, Long Term Care Insurance likely isn’t a good choice for you. Those individuals who already know that their financial status will make them eligible for Medicaid long term care benefits shouldn’t purchase a policy because it doesn’t make financial sense.

Knowing Your Risk

People buy Long Term Care Insurance because they understand the risk at hand and recognize the reality that it’s impossible to predict our future health. Even if you have $500,000 saved in assets, self-insuring isn’t wise. Just a few years of care can quickly exhaust much of your assets and if both you and your spouse happen to need care, it’s not a far fetched thought that you could end up spending it all on care, leaving you with very little or nothing left to cover living expenses in retirement.

Predicting your health isn’t feasible, but there are ways to know whether or not you are at a higher risk of needing care than others. To assess your risk, read our latest post. If you are interested in learning more about how to buy Long Term Care Insurance, click here.