When a financial services industry insurance protection plan has lots of media coverage it would be considered a good thing. However, the recent coverage on Long Term Care insurance has been reports about people receiving premium increases!
One question people reading these reports might have – Why are the companies doing this? There are many reasons but the primary ones are:
+ People are living longer and thus as “their parts wear out” about 70% will need some help with day to day life activities.
+ The cost of these special assistance services, here in Connecticut, is some of the highest in the US so it takes a lot of premium to pay these expenses.
+ Economic conditions have resulted in interest rates being very low for some time. Thus, the interest received, from the premiums companies invest in interest bearing accounts, has been very low. This low return does not cover the ever increasing current and anticipated future expenses for the assistance people need.
Some might react to the news and say – The premium is now too expensive so I think it’s a mistake to invest in this financial protection. Yes premiums have been going up and it is certainly too bad this had to happen. The question however becomes, which mistake would you prefer?
First: Using up your savings nest egg paying for high cost assistance, becoming poor, and then ending up being a big burden on family.
Second: Investing in this insurance and then not having to use it! It’s just the same as paying for home and car insurance and not having to use it, which people accept as normal.
It is also important to keep in mind – assistance is so expensive so the amount of premium a person pays, even though it has been going up, is still really pennies in comparison to the big cost of help. The value of this investment can be seen in the return a person with a policy could receive. For example, if a 55 year old pays the premium for a four year benefit period policy with certain benefits, for five years, all the money paid in could come back in benefits in just 78 days! After paying premium for twenty years they could break even in six months (189 days).
More information about the value of Long Term Care insurance can be found on – http://longtermcareins-ct.com/value.php
Looking back over the past 20 years we find the divorce rate for individuals in the baby boom generation has increased 50%. We also know more individuals in this group have stayed single.
What does all this mean? Many people will not have a spouse or children available to provide help with day to day life activities when needed in say 20 years. Some other points about – Who will help us:
● People are living longer and often think their health will not deteriorate and then one day they will just die! However, the facts tell us 70% or more individuals will need help by age 75. Thus, it will become harder and harder to find assistance.
● Over 80% of us have a relative, or know someone, who is or has received help because some of their “parts wore out” or because they were having trouble with mental ability. Thus, no one can predict their future and what might be called “Life Happens” medical related situations can occur at any time.
Bottom line, taking action and investing in Long Term Care insurance is the most effective way to prepare for the big financial obligation of paying for professional assistance which comes when assistance with day to day life activities is needed. It’s also the most economical way to prepare since the plan’s premium, whatever it might be, is just pennies on the dollar in comparison to the large amount of funds you would have to come up with to pay yourself.
Informative video stories on the value four people received plus a description of some myths and facts about Long Term Care insurance can be viewed on this link.
People who protected themselves financially, in case a need for high cost on going help happened, did so by investing in this important kind of insurance. They report they took action because:
- They did not want to burden family or others.
- They want to be in control so they can make their own decisions on the type of assistance and where it will be received.
Many others who put off taking action to protect themselves may find themselves facing things like:
- A quick loss of savings if assistance were suddenly needed. Why? The cost of long term services and support in Connecticut are some of the highest in the U.S.
- A higher premium when they apply later. Why?. Rates are 33% higher at 55 vs 50 and 60% higher at 60 vs 55!
- Not being able to obtain coverage. Why? They are now uninsurable because a change in health!
These short stories from six people highlight how Long Term Care insurance helped them and their family. These videos were published by LIFE (the Life and Health Foundation for Education)
When we look around at the probability of needing help at some point we find it is quite high. Even when the facts are there many people have not taken action to protect themselves. Thus, the question becomes – Do stories like you can see in these videos help you better understand the need to take action by investing in this important kind of coverage?
Let me know what you think.
Being able to hire professional help, with the plan’s special pool of funds, means family members:
+ Will be free to manage your assistance; to care about you; plus help as they can.
Note: Providing personal care to a parent is a very emotional and difficult task!
+ Won’t use up your savings nest egg and end up poor paying for high cost professional help!
+ Won’t lose control and thus can select where to receive the help you need!
+ Will be able to maintain as much independence as possible and thus retain your dignity.
+ Won’t have to worry about the conflict, which often develops among children, over spending all the parents savings nest egg for one parent’s care vs retaining it as retirement funds for the other.
The most important value individuals and families receive is what the benefit pool will become in the future. For example, if a person 55 selects a four year plan with an initial monthly benefit of $6,000 and 5% compound inflation protection and then looks forward 20 years when help might be needed their annual benefit pool would have grown to about $765,000.
Bottom line – No one can predict what will happen tomorrow thus the saying – Life is what happens when you are making other plans really emphasizes why investing in this special kind of ‘long term’ health insurance is so important.
Suze Orman recently told a personal story about the value of this special kind of protection.
John C Parker, RHU, LTCP