The Latest Facts About Long-Term Care Insurance; What News Reports Found On The Internet Often Get Wrong
Thank you for visiting our website. The American Association for Long-Term Care Insurance was established in 1997 with the goal of providing individuals with the most relevant,factual and current information upon which informed decisions could be made.
Today, there is so much information about long term care insurance today on the Internet. A lot is now quite out of date and some is just clearly erroneous -- even though it comes from websites bearing respected names like The Wall Street Journal and Forbes. Often these are posts by independent individuals not salaried journalists associated with the publication. If you are considering this protection, it can make your life quite difficult and certainly confusing.
With that in mind, I hope you find the information contained on this webpage to be of value. I always welcome your input, questions and comments.
REPLIES WRITTEN BY Jesse Slome, Executive Director
American Association for Long-Term Care Insurance
Page Posted February 2014 -- Replies represent personal opinion and are intended to give planning or tax advice.
Click Here to Email Your Question to Jesse Slome, AALTCI
When you are ready to request a free, no-obligation cost comparison from a designated long term care insurance professional (a member of the American Association for Long-Term Care Insurance)
Click here to complete our simple online questionnaire and get the ball rolling.
Real Facts About Long Term Care Insurance - 2014 Edition
Click on any of the questions below to jump to read the answer.
IF YOU DON'T SEE THE ANSWER TO YOUR QUESTION, please Email Jesse Slome and we'll get you the answer and add the information here to benefit future visitors.Click Here to Email Your Question to Jesse Slome, AALTCI
True or False? Long-Term Care Insurance Costs $4,000 - $6,000 Per-Person/Per-Year
A FALSE IMPRESSION Most people pay FAR LESS. In 2014, someone who is between ages 55 and 59 can expect to pay roughly $100 to $150-per month ($1,200 to $1,800) for the typical average-sized amount of long term care insurance coverage. Keep reading to see a year some average rates from our 2014 Long Term Care Insurance Price Index.
So, why do you see news reports that show higher amounts? Some insurance and financial advisers who are quoted by reporters only work with affluent clientele and they regularly recommend "very benefit rich" policies. These are expensive. If you want this much insurance coverage and can afford it, then by all means, but many people incorrectly assume all long term care insurance costs that much. THIS IS CLEARLY NOT THE CASE.
Some online news reports misstate the current reality. An online post in The Wall Street Journal (The Case For Skipping Long-Term Care Insurance, February 9, 2014) cites "the average premium can cost anywhere from $4,000 to $6000 annually per person, a lot higher even for high net-worth clients." My comment ... "wow! not even remotely close to reality!" But there it is appearing in a 'newspaper of record'.
I advocate a GOOD - BETTER - BEST approach to long term care insurance planning. You can read more by clicking this link (coming soon).
A 60-year old couple will pay about $2,000 a year (combined) and they will EACH have $164,250 of long-term care insurance benefits. Note that policy costs vary by insurer, vary by your health when you apply and, of course by what benefits and features you select.
That same 60-year old couple will pay about $4,000 a year (combined) BUT THEIR POLICY BENEFITS WILL GROW to $365,000 EACH when they reach age 85.
BOTTOM LINE The only way to know what long term care insurance costs is to request a cost-comparison from an experienced long term care insurance specialist who is appointed with multiple insurers.
A REASON TO WORK WITH A LONG-TERM CARE INSURANCE SPECIALIST
Each insurer sets the cost for their policies. Virtually identical coverage for a 60-year-old couple ranged from $3,025 to $6,500 (a 114% difference). 2014 AALTCI Price Index
Click here to have an Association Designated Specialist compare costs for you from leading insurers. There's NO cost and No obligation.
New Policy Costs Are Increasing 10 to 45 Percent A Year
FALSE & MISLEADING The same online post in The Wall Street Journal (The Case For Skipping Long-Term Care Insurance, February 9, 2014) cites "Premiums are going up 10% to 45% a year." This is just one of many posts that deal with rate increases for long term care insurance.
Here's why reporters get confused.
Are they talking about existing policies, those purchased anywhere from 2 years to 20 years ago? Or, are they talking about new policies -- the ones you'd buy today?
NEW POLICIES According to the Association's 2014 Long Term Care Insurance Price Index (where we compare real prices for single individuals and couples shopping for new policies today (Feb. 2014), the costs for a 60-year old couple INCREASED 3 PERCENT compared to 2013 and only 4.8% over the cost two years prior (2012).
OLD POLICIES Insurers have been raising prices on some (NOT ALL) older policies. Many were purchased 5 or 10 years ago. Some even earlier. Often, these policies contained a feature that increased policy benefits five (5) percent a year. The premiums policyholders pay account for only part of the dollars an insurer needs to accumulate to pay future claims. Investment return on the dollars they hold account for the rest (often half). We've seen a historic drop in interest rates.
With interest rates stuck at historic lows, insurers requested rate increases from the State Departments of Insurance (they govern all policies). ONLY CERTAIN POLICIES FACED RATE INCREASES a fact most articles leave out. And INSURERS OFFER POLICY HOLDERS AN WAY TO CONTINUE PAYING THE SAME AMOUNT.
The articles mislead readers into thinking insurers are forcing people to pay higher rates or drop their coverage. THEY ARE NOT. And, 98 to 99 PERCENT EITHER PAY THE SAME by accepting the new benefit formula or AGREE TO PAY THE HIGHER AMOUNT. For example, one major insurer offered policyholders the option of having their future benefits increase at three (3) percent instead of five (5) percent.
A REASON TO WORK WITH A LONG-TERM CARE INSURANCE SPECIALIST
Some insurance agents only are appointed to sell policies from one company. A good long term care insurance specialist will be appointed with 4 to 6 (or more) insurers. They'll work to find you the best coverage for the best cost.
Click here to have an Association Designated Specialist compare costs for you from leading insurers. There's NO cost and No obligation.
Your Policy Needs To Include Five (5) Percent Inflation Growth
SURE, IF YOU CAN AFFORD IT So much of what you'll read leads you to believe that long term care insurance policies automatically include the five percent benefit growth feature. This has always been an option (an option you choose to include and certainly one that impacts how much you'll pay).
Today, choosing the 5% inflation growth option will dramatically bump up the cost for your long-term care insurance. Depending on your age it can DOUBLE or TRIPLE your base cost of insurance protection.
3% versus 5%: The power of compound inflation growth is incredible. Say a couple (both age 55) buy policies with a combined benefit value of $364,000.
If they add a 3% compound growth option the combined value of their insurance policies is $764,228 at age 80 and $885,950 at age 85.
If they add a 5% compound growth option the combined value is $1,236,0188 at age 80 and $1,577,508 at age 85.
You'll Pay For The Difference There are only two ways an insurance company can accumulate the dollars to pay future claims. They collect premiums from you pay and they earn a return by investing the premiums you pay. With interest rates at historic lows, insurers now have to charge a lot more to those who want their policy to increase by five percent compounded annually.
Some reports you'll read make you feel that buying anything less than five percent will be insufficient. Of course no one can predict your particular need for care. But here's something worth considering: most people today purchase long term care insurance because they want to receive car in their own home (not in a skilled nursing home facility).
AALTCI studies show that 51 percent of new claims start with care at home (only 30.5% in a skilled nursing home). The annualized increase in home care costs (U.S. producer price Index Home Health Care Services) has increased 1.01% for years 2000 to 2012 and only 1.67% for years 1996 to 2012.
Based on 20 years in this industry I am comfortable saying that "some coverage is ALWAYS BETTER than none". Today, there are so many alternative options to make your coverage affordable and yet sufficient to meet many situations in the future.
A TIP FOR COUPLES
Several insurers offer a 'Shared Care" option that allows one spouse to 'tap' the benefits of the other spouse. You save by buying less coverage for each - but have a significant potential gain.
Click here to hear from an Association Designated Specialist who knows which LTC insurers offer the Shared Care option. There's NO cost and No obligation.
Should You Self Insure Against Long-Term Care Risk Or Buy Insurance?
That's the exact headline of a post written by Howard Gleckman who often writes on the Forbes blog post. Mr. Gleckman is an advocate for a government-sponsored program addressing long-term care. While that may happen one day (as in other countries) it's unlikely to happen anytime soon in the U.S.
In his column February 17, 2014, he writes that at age 35 "You can buy a decent LTC policy that pays $200/day for 3 years with a rider hat increases benefits by 4 percent-a-year to protect against inflation for about $65/month. That's equal to a benefit of about $219,000 in today's dollars." He goes on to say (this is exactly from the article) "Now assume instead that each month you invest that $65 in a lifecycle mutual fund that holds 60 percent stocks and 40 percent bonds. Let’s say the long-term rate of return will be 6 percent (that’s more conservative than some think, but the days of 8 percent annual returns are probably over). Further assume you won’t need long-term care until you are 85, so you’ll have 50 years of compounding. At age 85, you’ll have roughly $230,000.
And there are other advantages to self-insuring. That $65/month premium will surely increase over the next half century. In a recent interview, the CEO of LTC insurance giant Genworth figured annual increases of 2-5 percent are not unreasonable. There is also the question of whether your carrier will still be in business in 2064 and what happens if it is not.
WHY IS THIS TOTALLY MISLEADING?
$219,000 of current LTC insurance, with 4% inflation growth will be worth $1,010,984 at age 75. Sorry, my system does only 40 years. It will be worth far more at age 85.
Investment income is taxed every year (reducing the growth). Long term care insurance build-up of benefits is NOT taxed.
While premiums may be raised in future years, they DO NOT INCREASE YEARLY. Genworth was likely reflecting that someone buying a new policy (for the first time) will likely pay 2%-5% more in 2015 that someone buying new coverage in 2014.
LONG-TERM CARE INSURANCE IS NOT AN "INVESTMENT"Many media and financial advisers position this protection in investment terms. The truth is it is insurance. And, if you really think about it, no one hopes to use their insurance (though they are very glad they have it should they need it. If you insist on using it, you'll need to go to sleep at night hoping you get Alzheimer's Disease on day or have and survive a really good stroke. That would be as silly as Mr. Gleckman's arguments.
When you are ready to request a free, no-obligation cost comparison from a designated long term care insurance professional (a member of the American Association for Long-Term Care Insurance)
Click here to complete our simple online questionnaire and get the ball rolling.
