Long Term Care insurance is something that many people feel is necessary…and confusing. We asked the professionals at Pilot Financial to give us their thoughts on the most commonly asked questions.
What is the ideal age to consider LTC insurance?
The ideal age to consider Long-term Care Insurance is in your 50s. The median age is currently around 53. As you age, the premiums get more expensive and might end up being unaffordable for many. It is important to have the planning discussion early.
How does LTC affect legacy and/or financial planning?
Long-Term Care does affect families and finances. If individuals are not prepared for the unexpected care that they may have to have, they may be forced to have other family members help with either care or the financial means to pay for the care or both. The primary caregiver is almost always a family member. Usually the spouse, but more and more, it is the children assisting with the care. Without future planning for the unexpected LTC costs, the individual may not have the option to choose when, where and how they receive their care and at what level of care.
Is LTC something that can affect tax planning? In what way?
Long-Term Care affects tax planning in a huge way. If clients are not prepared to handle the rising cost of care, they will be forced to either self-fund or end up spending down assets so they can qualify for Medicaid to pay for their Long-Term Care. Being able to choose when, where and how you receive care is important to most people, especially couples. Most people want to receive care in the home. They want to avoid being in a nursing home as much as possible. They want to be surrounded by loved ones, not by hospital staff in a sterile environment. With LTC plans evolving today to a linked benefit type policy, it can be more affordable to clients that desire LTC insurance.
Once you’ve established a LTC policy, is this something that needs to be reviewed/changed over time?
Once a Long-Term Care policy has been purchased, it is important for the insurance agent to maintain the relationship with the client and the possibility of working with to help administer the claim when the time comes to start receiving care. At times, a client may want to increase coverage via another policy or may have to decrease some aspect of the policy due to the rising cost of care. Traditional Long-Term Care policies do not have guaranteed premiums and clients will receive a price increase. Typically this happens when they are living on a fixed income and therefore they may have to reduce coverage. If the agent does not maintain the relationship and assist the client with the better choices for increasing or decreasing coverage, clients may make the wrong choice that could have detrimental effects when the go on claim. Always, always maintain the relationship with the families of the insured.
What are things that an LTC professional considers when assisting someone with a policy?
Discussing Long-Term Care policies with a client start with a three-legged stool approach to funding Long-Term Care.
- Self-funding, which can deplete assets in as lttle as 12-18 months.
- Purchasing some form of a LTC policy.
- Having the government pay for your care.
The first option can be very expensive and can exhaust lifelong assets in a relatively short period of time. The third is not an option that most individuals would choose. The second is the best option if clients or family can afford the premium costs. Once it is determined which option is best for the client and if it is option two, then it’s time to decide what type of Long-Term Care plans are right for the client.