Understanding Facts When Planning For Long-Term Care

By Bane /
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A major consideration when planning for a successful future retirement is longevity. With longevity comes Long-Term Health Care. The financial costs and burdens of aging not only impact you, but your family, savings and lifestyle as well. Long-Term Care Insurance makes it easier on you and your family. The American Association for Long-Term Care Insurance said the nation’s insurance companies paid $9.2 Billion in benefits to American families in 2017 alone.

As you search the internet you may find information which is not fully accurate. It’s important to consider a few facts prior to retirement.

The US Department of Health and Human Services states if you reach the age of 65, you have a 7 in 10 chance of needing some type of Long-Term Care service. In 2016, the value of assistance provided by unpaid caregivers to people with Alzheimer’s or dementia was over $230 billion.

Many people think Long-Term Care will not happen to them. Others think their family will be able to take care of them without any problem. The fact remains as medical science advances the risk of needing care increases with longevity. Without an advance plan the impact is tremendous.

The national average for one year of home care is $49,192 based on a 44-hour week. Assisted living national average is $45,000 a year, and one year of skilled nursing costs nearly $100,000 annually. In 20 years, these costs will certainly increase.

You must factor the financial costs and burdens of aging as part of your retirement planning. Affordable Long-Term Care Insurance will provide the resources for quality care, either at home or in a facility, allowing family to be family.

Nearly half the people who apply for LTC Insurance after age 70 are declined because of health, compared to 17 percent for those under age 60. Premiums are very affordable – especially when you are younger. Acting prior to retirement is key.

Premiums are intended to remain level, based on your health, age and the amount of benefits you apply for. You may read articles about rate increases. These increases have to do with “legacy products”. These are older series of policies that were priced prior to the interest rate crash and rate stabilization.

First, most long-term care insurance policies are intended to have level premiums. There are some policies where the premium does go up each year, by design, as benefits increase or you elect to increase benefits. However, most policies have premiums which are intended to remain level based on your age at the time of application, your health, and the amount of coverage you selected. Since most people will select some kind of inflation protection, the premium is intended to remain level while the benefits increase-the cost of the inflation benefit is already factored into the premium. As you read articles about premiums increasing, be aware that there are plans that intentionally go up over time.

Today, all plans are priced with the very low interest rate environment in mind (interest rates have been low in the United States over the last decade). This was not always the case. Some of the older series of products have had rate increases. Those increases were based on a few factors:

• Interest rates

• Lapse rates (meaning, how many people drop their policies. In practice, very few do, but this was not factored into premium pricing on many older plans)

• Claims and underwriting experience

Today, underwriting is much more scientific and conservative than before. Premium costs now consider low interest rates, low lapse rates and actual claims experience as well. The Society of Actuaries suggests the chance of a rate increase on a long-term care policy sold today is very, very low. Regardless of those facts, it is also not easy for insurance companies to raise rates on the products being sold today.

 

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Bane
If you cannot do great things, do small things in a great way.