Category Archives: Long term care Insurance

Should You Terminate Term Life Insurance for Long-Term Care Insurance?

Is it a good idea to terminate a term life insurance policy and use the money to buy Long-Term Care Insurance? This was the question a healthy individual, age 65, who is planning to work full-time until 70, and has a wife age 55, asked.

Term Life Insurance is one of the cheapest ways to ensure maximum financial protection for your dependents. It would not be ideal to terminate term life Insurance, as his goal is to provide financial protection to his wife in the event of death.

Long-Term Care Insurance would help in paying for assistance, if he becomes chronically ill or disabled, and requires assistance with activities of daily living. The premium will depend on various factors such as age, current health condition, the limits of benefits chosen, etc.

Long-Term Care Insurance should be bought considering the affordability to pay the premium even after retirement. If the premium payment becomes unaffordable and he stops paying the premium, the policy terminates, and all benefits accrued will be lost.

The decision to buy Long-Term Care Insurance should be based on his income, expenses and other finances before and after retirement. Also, family longevity and other health concerns are to be kept in mind.

Younger individuals have an alternative that is more flexible and can relatively be more affordable than Long-Term Care Insurance. That is buying a Whole Life Insurance Policy, with a Long-Term Care rider.

Whole life policies are costlier than the Term Life Insurance, but they have a savings element added to the insurance benefit. It builds cash value for as long as you pay the premiums. The Long-Term Care rider is a relatively cheap add-on when compared to a standalone Long-Term Care Insurance policy. It should be considered carefully, as the benefits available under the rider may be less restrictive.

Proper planning is needed when it comes to your future financial health. To get the facts and understand all the options available based on your own unique needs; fill out the form to the right to download your long-term care insurance planning guide today.

The information is free; the results could pay you hundreds of thousands of dollars when you need it most.

Governor Newsom and Aging

by Louis H. Brownstone 

In his State of the State address on February 11th, 2019, newly elected Governor Gavin Newsom spoke the following words regarding aging and long term care:

Now, let’s talk about something too often overlooked: The Golden State is getting grayer. We need to get ready for the major demographic challenge heading our way.

For the first time in our history, older Californians will outnumber young children. Over the next decade, our statewide senior population will increase by 4 million. In 25 years, it will double. And more than half will require some form of long term care.

Growing old knows no boundaries—aging doesn’t care what race you are, your economic status, or if you’re single with no other family support.

I’ve had some personal—and painful—experience with this recently. I lost my father over the holidays, after years of declining physical health and dementia. He was determined to live out his days with dignity. He also happened to be a retired public official with a pension and a support circle of family and friends. Even with all those advantages, it was a daily challenge to meet his needs so he could live in peace and maintain a good quality of life.

Millions of Californians share a similar story, and the numbers will only grow. It’s time for a new Master Plan on Aging. It must address…person-centered care.

Governor Newsom is really speaking about two related issues. The first is the financial impact of the aging baby boomers as they become sick and place huge burdens on Medi-Cal. He states that long term care expenses will double in 25 years, and that’s probably a low estimate.

The second issue regards caregiving. Most caregivers will be family members because there will be a shortage of professional caregivers and most families won’t be able to afford their cost. Many of you reading this are or have been caregivers. You know that caregiving is tough! It changes your life, let alone that of the person receiving the care.

It’s likely that Governor Newsom will bring a new sense of purpose to Sacramento and propose new solutions to aging and caregiving in California. Goodness knows we need new caregiving solutions right away. We now have a patchwork of many public and private agencies providing caregiving to various segments of our population, who often don’t know of or understand the programs that are available. There’s a possibility that the Governor will appoint one person to try to simplify and consolidate these programs.

The most comprehensive study on caregiving I know of is “Beyond Dollars” by Genworth Financial, which researched some 1,200 caregivers, care recipients, and family members in 2018. The big takeaway is that caregiving takes a significant toll on the financial, physical and emotional lives of the families and friends of every care recipient. No surprise here, but look at some of the statistical conclusions:

  • 60% of caregivers had to cut back on luxury expenditures
  • 41% of caregivers had depression and feelings or resentment
  • 53% had a high level of stress
  • 46% believe their health and well-being was negatively affected
  • 52% did not feel qualified to provide physical care
  • 48% had to reduce their quality of living
  • 70% missed time from work
  • 30% missed career opportunities
  • 50% have less time for their spouse, children and themselves
  • 63% had to pay for care with their own savings/investments
  • Family caregivers spent an average of 21 hours/week on caregiving
  • Family caregivers spent an average of $10,423/year in out-of-pocket expenses.

One can see from these numbers what a devasting impact a sick family member can have on the entire family. There are now a variety of products that provide long term care solutions. Are you sufficiently educated on these various options?

Long Term Care insurance premiums can be tax deductible

IRS increases 2021 tax deduction limits for long-term care insurance. The 2021 deductible…

2021 tax deduction limits for long-term care insurance
Attained age before close of tax year 2020
Age Deduction Limit
40 or less $450
More than 40 but not more than 50 $850
More than 50 but not more than 60 $1,690
More than 60 but not more than 70 $4,520
More than 70 $5,640

Individual taxpayers are allowed to deduct the cost of their policy (and that of their spouse) as part of their medical expense deduction to the extent that their medical expenses exceed 10% of their adjusted gross income. Those who are self-employed or own an LLC, S Corp, or C Corp have more extensive deductions. Ask for our Tax Guide. Tax-qualified long-term care insurance benefits are generally tax-free.

November is Long Term Care Awareness Month

How will you pay for Long Term Care services?

People work a lifetime to accumulate assets to see them through retirement. Unfortunately, relying on those assets to fund long-term care services may mean:
• Selling stocks or property, cashing in CDs or dipping into 401(k) or savings accounts
• Paying unexpected capital gains tax, income tax and potential surrender charges
• Foregoing returns the liquidated assets were expected to generate
• Abandoning plans to leave an inheritance to children and grandchildren

Planning now means having better choices later.

Dealing with Long Term Care Insurance Rate Increases

by Louis H. Brownstone 

At first, many carriers saw long term care insurance as a terrific marketing opportunity and rushed into the market beginning in 1988 with competitive prices. For years, agents and brokers sold policies with the understanding that the carriers had appropriately priced their products, and that the chances for rate increases were small. However, the industry was a young one, and no one knew for sure whether or not the pricing would prove to be accurate.

The carriers then broadened the appeal of long term care insurance in the mid-1990s by including home health care as a major benefit, with little increase in premium. These benefits were very attractive to consumers, and they eventually led to a large number of home health care claims.

This, in turn, stressed the profitability of long term care insurance products. By the late 1990s, other problems arose, and carriers saw that their pricing assumptions were incorrect for four major reasons:

  1. Interest rates were well below expectations so that carriers made less gain investing the premiums they received;
  2. Unlike life insurance, lapse rates were extremely low, creating more future policyholder claim potential;
  3. Claims were more frequent, with higher costs and of longer duration than expected;
  4. These factors, in turn, led to higher governmental reserve requirements, tying up assets.

Until now, insurance commissioners have been very resistive of carrier requests for big rate increases because they would impose extreme hardship on senior Americans with limited income and assets. Their emphasis was to protect the consumer, which was the major part of their job. They believed that insurance carriers had created their own problems by underpricing their products in order to sell more. They “made their beds” and needed to sleep in them. Insurance is a gamble, and the carriers have lost, so they said.

But there has been a major change in thinking in the last five years. Insurance commissioners have realized that they need to provide carriers enough flexibility in pricing to enable them to pay future claims. Consumers in turn needed to be confident that their claims would be paid. They would be furious if their thousands of dollars of investment turned out to be wasted.

Insurance commissioners, therefore, needed to grant significant rate increases to protect consumers, and have done so. Because there was such a long period of time in which any rate increases which were granted were small, the rate increases needed now have only become greater as long term care insurance policies have matured.

This has led insurance commissioners to grant one-time rate increases as high as 80% to 95% on major blocs of policies. Carriers have to prove that their requests for rate increases are actually warranted.

In many instances, insurance commissioners are insisting that carriers offer benefit changes which can ameliorate or even prevent any increase in premium. These options can or cannot be acceptable alternatives, depending on the current benefits in a policy..

This discussion should not end without mentioning that the long term care insurance industry has learned a great deal in the last thirty-plus years and that current rates should be far more stable. Hybrid and linked policies often have guaranteed rates, but this may not be such a big point of difference if traditional long term care insurance prices remain stable. Because the hybrid and linked products contain two benefits and the traditional long term care product has only one benefit, the traditional long term care product will probably remain the less expensive alternative.

Critical things many people don’t know about Long-Term Care Insurance

Long-Term Care Insurance plans have come a long way in offering convenient and flexible long-term care solutions, since the early days. Still, there are certain misunderstandings and objections in the minds of some people. Let’s have a look at some of these…

The most common misunderstanding regarding long-term care insurance is that it provides only nursing care benefits. But, the fact is that it covers home care for a person who opts to “age in place” as well as adult day care and assisted living facilities. American Association for Long Term Care Insurance (AALTCI) statistics shows that Home Care claims are the most among newly opened long-term care insurance claims in recent years.

Today, the benefits payable under long-term care insurance policies are very flexible. Most policies offer services such as home modifications to make your stay at home longer and safer. Modifications such as widening doorways, building wheelchair ramps or installing lifts and handrails are provided under long-term care insurance policies.

The role played by family caregivers is very critical in long-term care. Long-term care insurance policies offer options that make it comfortable for families to care for the elders in their family. Care giver training for family members is provided to ensure that the recipients are getting the best possible care. Even, care provided by family friends, acting as informal caregivers, is reimbursable under some policies.

If the one insured person exhausted his or her benefits, he or she can use the benefits available to his or her spouse. This enables the couples to share their coverage and maximize the benefits. Many Long-term care insurance policies offer this optional benefit called “shared care”.

Long-term Care Insurance policy should be a key element in your retirement plan. It is always better to plan ahead and start early. Age and health conditions are the two most important factors when you are looking for an insurance policy. At a younger age, these factors could be more favorable to you. The coverage will be affordable too. Younger age doesn’t imply that you don’t need any care. Accidents and illnesses that can lead to availing extended personal care can happen at any age. So, it is always better to start early.