Had Enough With Those Confusing LTCI Options?


Long Term Care Insurance (LTCI) is not for everyone.  I only recommend it for middle class Americans.  If you were able to save more than $750,000, LTCI is a luxury.  It is nice to have but, in a pinch, you could pay for your own Long Term Care.

If your retirement savings are less than $30,000 you are probably close to qualifying for your state’s Medicaid program.  If you are comfortable with the Medicaid rules in your state, there is probably no need for you to spend your money on LTCI.

If, however, you anticipate retiring with $30,000 – $750,000 in savings, LTCI may be right for you.

Before you rush out and buy a LTCI policy, take some time to familiarize yourself with LTCI.  Read, “A Shopper’s Guide To Long Term Care Insurance.”  It is a free, government sponsored publication designed to help people who want LTCI.

If that publication does not answer your questions, hopefully this post will.

FAQs You Should Know Before You Buy Long Term Care Insurance
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If you have read both of the sources mentioned above and still have questions, read my book, “Faqs You Should Know Know Before You Buy Long Term Care Insurance.”  It is available in both PDF and Kindle formats.

When you get ready to buy Long Term Care insurance, you are going to have to make several decisions.  It will save you time, aggravation, and money if you are able to tell your insurance agent what you want.  If you rely on his advice, you run the risk of buying what the insurance agent wants to sell rather than what you want to buy.

In this post I want to share with you some basic options from which you will be required to choose.

DAILY/MONTHLY MAXIMUM

All LTCI policies require that you select either a daily or monthly benefit maximum.  If you have no idea how much you need, Genworth publishes the average costs for Long Term Care across the nation each year.  Click here to see the average cost for Home Health Care, Adult Day Care, Assisted Living and Private Nursing Homes in your area.

The benefit level you choose assumes that you will need to pay for a stay in a nursing home.  However, that is not the only expense that LTCI pays.  Most LTCI policies will also pay for your Long Term Care at home or in an Assisted Living facility.

Choosing a benefit maximum can be tricky.  You will need to be careful.  The monthly maximum will only be paid in the event you are sent to a nursing home. The amount your LTCI will pay for an Assisted Living facility or Home Health Care will be a percentage of your monthly maximum benefit.

Unless you request differently, your LTCI will probably only pay 75% of your maximum benefit for an Assisted Living facility and only 50% for Home Health Care.  In most cases, this ratio is satisfactory but it is up to you to determine the expenses in your area.  If you need more coverage for either Assisted Living or Home Health Care, you need to secure it when you do your application.  If you wait until you are “on claim” to find out that you will need more money, it is too late.

ANNUAL MULTIPLIER

After you have chosen a maximum monthly benefit, you will be required to choose an annual multiplier.  This option is the most misunderstood of them all.

Many people mistakenly think that is the maximum amount of time for which benefits will be paid.  That is incorrect.

The Annual Multiplier is just a mathematical tool.  Your insurance company will use it to calculate the pool of money that you can use to pay for Long Term Care.  There are no time limits for people who are “on claim.”  Al long as there is money in your benefit pool, your Long Term Care bills will be paid.

The formula your insurance company will use to determine your benefit pool is…

ELIMINATION PERIOD

The Elimination Period that you must choose acts like the deductible in your Major Medical plan.  It is the period of time that you agree to personally pay for Long Term Care before your LTCI starts paying.

You can elect a plan with a 0-day Elimination Period if you do not want to pay anything for Long Term Care.  You can elect a 365-day Elimination Period if you have enough money in savings to pay your Long Term Care bills for a full year.  The longer your Elimination Period is, the less your insurance premiums will be.

The most common Elimination Period is 90 days.  It requires your insurance company to start paying after you have paid for your own Long Term Care for 3 months.

Most insurance companies offer an optional rider that will waive the Elimination Period for Long Term Care at home.  That rider is generally very inexpensive.  In my opinion, it is worth the extra premium.

When the most common claim for Long Term Care is for cancer care at home, this waiver option is possibly the most important option available.  I do not even quote LTCI without it.

In this post you learned about the basic decisions you will need to make when, and if, you buy Long Term Care insurance.   If you want more information about planning for insurance during retirement, I invite you to purchase our book on insurance planning for retirement.

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