Why Should You Consider LTCI?

I have been in insurance sales for 25 years. Sometimes, I cannot help sounding like a salesman. Regardless of what the headline implies, I hope that you will take the time to read this lesson. Whether or not you use The Insurance Barn to meet your insurance needs is immaterial.

Most people prefer to work with a local insurance agent whom they can see face-to-face. Unless you live in Houston or Dallas, you will use a local insurance agent to help you.

You are about to understand why Long Term Care insurance may be the most important type of insurance that you ever buy. Later in this course, you will learn what to look for when you buy LTCI. In this lesson, I want to share some of the reasons why you may want to consider purchasing Long Term Care insurance before you retire.

Watch the video to learn more about what you should be learning about Long Term Care insurance.

Most experts that I have consulted tell me that 70% of Americans who reach age 65 will need Long Term Care at some point in their life. Of those who do, only 15% will need help in a skilled nursing facility. That means that 85% of them will be able to maintain their independence with a little bit of help either at home or in an Assisted Living facility.

Unfortunately, less than 10% of Americans have elected to allow a private insurance company to pay those Long Term Care bills. Ninety percent of the American population assume that they will be in the 30% of Americans that will not need help during retirement. They are willing to rely on their personal retirement savings for Long Term Care until they are able to qualify for Medicaid if they need assistance. Either they are willing to retaing the risks of old-age or they have a wrong idea of what Long Term Care insurance is all about.

The chart below shows the the most recent experiences for LTCI claims for one of the insurance companies with whom I have a contract.

You have probably heard how expensive LTCI can be. Well, the rumors are true. LTCI premiums can be quite expensive for people who procrastinate. Last year a client wanted a policy with a benefit that was sufficient to pay for a private room in a “private-pay” nursing home. She had waited until she enrolled in Medicare to apply for LTCI. The premium was going to be over $600 a month. That was just for her.

A few months later, I worked with a couple of younger Baby Boomers. The husband was 52 and the wife had just turned 50. They were only interested in getting a policy that was sufficient to hire a Home Care aide. The premium to cover both of them was right at $100 a month.

The lesson to be learned is that there are two variables to the price you pay. If you let either one of them get out of control, your LTCI premium can easily sky-rocket.

AGE – One of the keys to keeping your premium low is to remember that the older you are the more expensive LTCI will be. Someone who is 70 will pay almost 4 times what someone who is 50 will pay for the same plan.

BENEFIT – The more benefit you purchase, the higher your premium will be. There is no law that requires you to buy enough LTCI to pay for a private room in a private-pay nursing facility. That would be the ideal but the premiums may be too expensive, especially if you waited until after retirement. The “Dialed Down” strategy is significantly less expensive. It assumes that you are more likely to need to hire a Home Care aide to help with your Long Term Care needs. If you use the “Dialed Down” strategy, you will only need to purchase enough LTCI to pay for hiring a Home Health aide. If you do get sick enough that you need to go to a nursing home, that money can be applied towards your nursing home expenses. You would pay the difference out of your retirement savings until you are able to qualify for Medicaid in your state. If your state offers Partnership policies, you will be able to shelter some, or all, of your assets from Medicaid’s Asset Test and Estate Recovery. (When you shop for LTCI, make certain to tell your insurance agent that you want a “Partnership Plan” if one is available in your state. After you get your policy, read through it. Make certain that you see the words, “Partnership Plan” on the title page. If you do not, ask your agent why it is missing.)

The Long Term Care Insurance Association has prepared an educational video to help you understand when the best time to buy LTCI is if you think that LTCI is a solution for your future Long Term Care expenses. Click the banner below to watch the video.