What are the factors that impact your insurability and price?
In our previous articles, we reviewed the basics of what long term care and long-term care insurance is and briefly explored the intersections of government/laws and long-term care insurance. Let’s now review when it might make sense to consider purchasing a long term care policy and how these plans are priced.
Many financial planners can provide a detailed analysis of assets, income, investments and savings, vs. spending dollars on an insurance plan. These can be very helpful and strategic tools in determining:
- Whether you need insurance or can “self- insure”
- The best age at which to purchase a plan (although generally the 40’s, 50’s and early -mid 60’s is best)
- The amount of “shared risk” you can manage (i.e. how much you are willing to pay out of pocket should care be required vs. how much of that burden you wish to shift to an insurance company).
Nevertheless, less tangible motivators may be equally if not more important.
- Will I sleep better at night having the insurance or will I sleep better with those extra premium dollars in my bank account?
- Do I hope to leave an inheritance to my spouse, children, favorite charity?
- Do I have family members who could provide my care, and would I want them to provide that care?
- Will my health still be good enough to purchase insurance in the future if I decide to wait?
It is probably no surprise that women, in addition to being the primary caregivers, tend to live longer and require more care than men. Here are some statistics that are particularly telling:
- Women have 10 times the chance (as men) of reaching age 85
- The risk of a woman over age 65 of becoming cognitively impaired or requiring assistance with activities of daily living is 72% (vs. 44% for men)
- In 2010 there were approximately 48.9 million caregivers. 64% of these were women. The typical caregiver is a 48 year old woman who provides more than 20 hours of care each week.
Because of these and other statistics, women in particular should seriously consider long term care insurance. Of course, the insurance companies are also familiar with these statistics and consequently the cost of insurance for women is higher than for men. Premiums are lower for couples than singles, and lowest for gay male couples.
Other factors affecting the cost of policies, other than gender are:
- Monthly benefit amount
- Deductible period
- Type of inflation protection
- Benefit period
- Shared care plans (in which a couple shares a pool of dollars)
- Spouse security benefit (for an uninsurable partner)
- Indemnity benefit (pays a fixed dollar amount rather than reimbursement for care provided)
- Some conditions including Parkinsons, Alzheimer’s, M.S., strokes, crippling arthritis, severe back issues, are generally not insurable
- Medical history, particularly over last 5 years will be significant
- Obesity, dangerously high blood pressure, high A1 C levels with diabetes and certain medications may result in being uninsurable
Other factors that can affect the cost of coverage are:
- Whether or not you are part of certain associations that can provide discounts
- If you are paying premiums through your C- Corp (of which you are the owner)
- If you are taking the premiums as a medical deduction once you reach a 10% of adjusted gross income threshold. (These last two items should be discussed with your accountant)
Finally, if you are considering a long term care approach that is either a rider to a traditional life insurance policy or a combination universal life insurance/long term care plan (often called asset based long term care insurance), there are additional factors that can affect the cost:
- Death benefit amount
- Shared plan vs. individual plan
- Return of premium (100% or less)
- Lifetime benefit period vs. finite benefit period
- Single premium, 10 Pay, 20 Pay or other (pay premiums for 10 or 20 years and then the policy is fully paid up)
Again, as explained in the first article of this series, an “apples to apples” comparison is not really possible. It is imperative to work with someone you trust who is knowledgeable about all of the different types of policies available as well as the many changes that continue to take place with long term care plans.
Our next article will address some of these changes and provide you with some questions to ask yourself as well as to ask your financial planner as you begin to explore this further.
With thanks to contributor Carol Einhorn of Trisure Group.
Carol G. Einhorn is a nationally known long-term care insurance specialist. She is principal, along with her husband Jules, of TriSure Group, an insurance firm that focuses on life insurance, disability and long-term care.
Carol lectures frequently to groups of seniors and health administrators concerned with the issues of long term care, Medicare and Medicaid and has authored a number of articles on these topics. Also, she presents seminars to accounting and law firms and has been a guest on a variety of radio and television programs. She has served as a consultant to many major insurance companies and has testified as an expert witness before the Pennsylvania State House Insurance Committee.
She says: “My best attribute is that I am a good and compassionate listener and I apply my 25+ years’ experience in the long-term care industry to help solve problems for clients.”
Carol can be reached at:
P.O. Box 220
Langhorne, PA 19047
Disclaimer: The material in this blog is for educational purposes only. It is not intended to replace, nor does it replace, consulting with a physician, lawyer, accountant, financial planner or other qualified professional.