Long-Term Care Insurance:
Procrastination Could Mean Fewer Choices and Higher Costs
By Sally Leimbach
There is no better time to make a decision about
purchasing long-term care insurance (LTCI) than right now.
Procrastinating regarding this important part of your financial
planning could well rob you of choices in your coverage and cost you
more money. These are pretty strong words, but they are appropriate
for the adjustments that are taking place in the LTCI marketplace.
Early entrants into the LTCI market sometimes priced
their products too low – their claims and expenses have exceeded their
premium dollars. This has caused some to withdraw from the market and
others to raise premiums significantly. Fortunately, there are
highly-rated companies who have entered the marketplace. They have
learned from the experience of others and are providing comprehensive
coverage and affordable premiums.
The long-term care insurance marketplace is maturing
and changing. However, there are still opportunities to purchase
long-term care insurance before premium costs rise substantially and
options become more limited. Let’s look at some facts about changes in
the marketplace and how to make the most of them:
** Cost of quality care in the Baltimore/Washington area is now
easily $73,000 annually for care in a nursing facility with care at
home (Home Health Aid) ranging from $14 to $20 per hour. These costs
are increasing approximately 5 percent compounded per year.
** Premiums for newly-approved LTCI policies
have increased about 25 percent for married couples and 40 percent for
single applicants.
** Long-term care insurance underwriters have recently become
much more selective regarding certain medical conditions. This is due
to new information available regarding claimants, focusing on
frequency and duration of claims. The selectivity varies significantly
from carrier to carrier.
Other indicators of tougher underwriting
include:
** Less liberal height/weight charts.
** More face-to-face and telephone evaluation interviews
required at younger ages.
** Preferred rates being issued to fewer applicants.
Some insurance companies are offering reduced
options:
** No preferred rates allowed for lifetime benefits.
** No lifetime benefit duration allowed for people who can not
qualify for at least standard rates.
** No total cash benefits allowed or greatly increased cost if
offered.
So, how do you make lemonade out of lemons in the LTCI
marketplace?
** Realize that prices and policy options offered in the past
are not able to be sustained in light of the claims experience of some
insurance companies. Long-term care costs are increasing and premiums
are bound to increase as well.
** Married couples should definitely consider the purchase of
LTCI, not only because it is more affordable for married couples but
because they are protecting each other.
** Whether you are single or married, the younger and healthier
you are, the lower your premiums will be, and more policy options will
also be available to you.
** Be selective when choosing an insurance company. Premiums
and policy options and provisions differ and a trusted broker can be
invaluable in pointing out appropriate companies to you.
** A plan sponsored by an employer is often an advantageous way
to purchase long-term care insurance. However, an individual policy
can provide better contract language at less cost if you are married
and in good health. So before purchasing through your employer, be
sure to investigate alternatives in the private marketplace.
** Members of the Maryland State Bar Association, their
spouses, parents and parents-in-law have discounted LTCI policies
available to them; compare rates and options with other policies you
may be considering.
For many Americans, long-term care insurance is the
appropriate tool for them to use when planning for potential long-term
care expenses. Without this insurance, they don’t know if the cost for
long-term care will be zero or hundreds of thousands of dollars. By
purchasing long-term care insurance, the cost becomes a definable
expense - the premium cost for the insurance plus any portion of the
care that an individual chooses not to insure, such as the waiting
period and/or a portion of the actual cost of care.
Consumers may see increased LTCI premium costs and
perhaps fewer options compared with those available in the past.
However, they should feel confident that they are doing the right
thing by purchasing long-term care insurance and defining their cost
for long-term care.
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