How does Long Term Care insurance work?

 

I recently received a question – How does Long Term Care insurance work?

OK if one person has this question many others also do. Thus, this post is to share a couple points on the coverage:

First – What does this special kind of insurance do? It provides funds to cover the cost of a person’s long term services & support when they need substantial assistance to perform day to day life functions. Things such as – eating, dressing, bathing, going to the toilet, or transferring.

Professionals in the industry call this assistance with life functions – help with activities of daily living (ADLs).

How does a person qualify to have this important assistance paid? –  A health care professional, such as a physical therapist, develops a care plan, which indicates the person currently needs help with 2 or more ADLs and it is anticipated the assistance will be be needed for at least 90 days.

When the Long Term Care insurance company receives the care plan they can begin to reimburse eligible services such as:

Professionals coming to support you in your home

 Adult Day Services. Assistance during the day at a facility in their area so the person’s family or other care giver can go to work

 For a person living in an Assisted Living Facility

 For a person who needs complex help 24/7 and is in a Long term care facility.

 

Second – How does the coverage work? There are three main provisions to discuss when reviewing this important kind of insurance and developing a plan.

 Benefit amount – the amount of funds a person can receive, who is eligible for professional assistance. This is sometimes expressed as a daily benefit. A monthly benefit is also an option to give a person more flexibility. How? The kind and amount of help a person needs often varies from one day to another. Thus, selecting a monthly vs a daily benefit means funds will be available to pay the extra services received during one day.

 Waiting period – the number of days a person selects before their reimbursement for professional help will begin. Many people select 90 days, which will be for assistance in a facility and select an option to have no waiting when assistance is received at home. BTW research tells us most long term services are provided at home.

 Benefit period – the length of time, expressed in years, a person would be eligible receive their benefits. Multiplying their Benefit Amount by the Benefit Period results in the plan’s total pool of funds. Funds not used during the Benefit period will continue to be available.

 Inflation protection is another provision to review. It’s optional but very important. Why? When a person buys a plan they might not need help for 20 or more years. Thus, since professional long term services will certainly be more expensive over time this provision increases the plan’s Benefit Amount and the pool of funds each year. It’s common to use a 5% compounded increase.

 


Will I need help getting around later in life?

 

Most of us respond to this question by thinking – I’m in good shape today so I will continue to be OK later in life. However, the reality is a lot of us will need some help.

Today’s post shares some insights about how many need help from a recent study of 8,000 older individuals living at home. It was reported in a Harvard Medical School publication. Some findings from the survey:

31% reported performing all their day to day life activities without any help.

25% performed their activities but did use, for example, a bathroom grab bar or a cane.

21% needed help from someone with at least one daily activity

18% had trouble being mobile, even when using a device or after making changes in their home.

6% had to limit their mobility, even with assistance devices.

The study also found 45% of the participants who were 65 to 69 indicated they did not need any help vs only 4% 90 or older did not need assistance.

A couple important points come out when thinking about these findings:

First – Take time to think about what you would like if assistance is needed. Then, to achieve what you want to happen the most effective thing to do is – buy Long Term Care insurance. It’s also the most economical way to pay for the help vs having to find funds from investments to pay these professionals. Having access to the plan’s special benefit pool means:

● You will not become a burden on family.

● Your children won’t have to face the very emotional and difficult task of providing you personal care!

● You should not have to worry about conflict in your family on whether your savings nest egg is being spent for your assistance vs being retained for the other parent.

 

Second – Devote more time to taking care of yourself. I am very glad to see more coverage in the media, communication within companies, and in other ways to help people understand the importance of everyone taking care of themselves. Doing this does not mean you will not need assistance in the future. But if it does having better health could result in not needing help as early or as much.

 

Some say – Wow Long Term Care insurance is expensive. Yes it is but the premium for this important insurance vs the risk is lower than the premium vs the risk of say our car or home insurance! 

Call John C Parker on my Google Voice # at 860.451.9793 today if any questions.

 


What’s the most effective way to pay for professional long term services and support?

 

Quick answer – buy what I like to call long term health insurance.

Why? Owning this special kind of financial protection is much better than “just paying” for this help yourself and quickly using up most of your savings nest egg. 

How much protection to buy?  We are able to buy a certain amount of homeowners insurance because we know the value of our home. With long term services and support we do not know how much help might be needed or for how long they will be used. Here are some points to think about:

  • Cost sharing is a way to have more protection at a lower cost. Look at what amount of help you could pay from say social security or income from investments and what amount would you want your Long Term Care insurance plan to pay.
  • These special services are forecast to double in cost over 12 to 15 years. To protect against this it is important to have a plan with inflation protection. Even though this option is expensive it must be considered.
  • We are living longer, which in many ways is great. Longevity however raises the probability we will have a change in health or develop frailties later in life. This in turn increases the need to protect your financial nest egg.
  • One idea for funds to pay your plan’s premium is to use some dollars from income and some from the interest you earn on financial investments.
  • Paying for your plan on an annual basis may be 8% lower than monthly.
  • The premium for this important insurance is lower than the cost vs risk of our homeowner’s coverage and the other kinds of insurance we have!  This is just one of the many reasons to buy this special kind of financial protection.

Questions – contact John C Parker, RHU, LTCP


What people fear if a life changing illness happens!

Want to share some points from a recent online survey about people’s concerns. Sun Life Financial asked 4,116 full time employees, to describe their greatest concern if a life changing illness were to occur. Their average age was 43 and participants had a median household income of $51,000. The concerns expressed were about:

● The financial impact. 47% said this.

● Dying. 29% said this.

● The emotional impact. 22% expressed this.

People have indicated to me at various times a concern about not having enough money if something where to happen. Thus, I found it very much of interest that almost 50% are reporting this concern.

Since many are concerned the question becomes what can be done to offset it. I believe the most effective and economical solution is for individuals to buy Long Term Care insurance. Why?

  • Having funds in this special kind of insurance’s benefit pool means they can then hire professionals to provide needed assistance. Having professional help means they won’t become a burden on family. It will also enable them to be better able to maintain as much independence as possible and thus retain their dignity.
  • Children won’t have to face the very emotional and difficult task of providing personal care to a parent! Thus, they will be free to manage the assistance you are receiving; to care about you; plus help as they can.
  • Having this special kind of financial protection means you should not have to worry about the conflict, which often develops among children. What causes a problem? The concern, which is often raised, is their parent’s savings nest egg is being spent for the care of one parent vs retaining these funds for the other.

Some say – Wow Long Term Care insurance is expensive. Yes it is but in comparison to paying yourself for the very high cost of professional assistance here in Conn it results in the premium for this important insurance being lower than the premium cost vs risk of other insurance we have such as on our car or our home! 

Call John C Parker today at 860.739.0005 if any questions.


Let’s look to the future

Certainly none of us can see tomorrow. On the other hand considering some trends, in what people are now doing, can give us an indication of what we might expect to see.

During this year’s American Society of Aging annual conference Ken Dychtwald, PhD who is CEO of Age Wave was a keynote speaker. He is a leading authority on our aging population. I listened to a video of his presentation and want to share some of his points. I think they can help us understand what we may see or experience in the future.

BTW- the recording of this talk is on the home page of AgeWave.com

● People certainly are living much longer, which he says changes everything. He indicated the way we do things over our life span has been changing and is no longer a standard sequence of a period of time in education, then working, and then retiring.

● People are now doing different things at different points in their life. In other words what they want, when they want not what others say should be done. He referenced some surveys, which tell us people recognize they cannot just rely on income from government benefits or employer retirement plans but do need to take personal responsibility for their financial future. However, as a general statement they are not looking ahead and planning (saving) for the future. Why? Their current focus is on doing things and going places.

● When asked about retirement years 91% of people say they expect to be happy. 70% want to work, some amount, but do something different. They also want to stay connected and to have freedom.

There is another thing we know about what happens when people live longer! Their chance of developing frailties and/or encountering other changes in health goes way up. The American Society of Aging previous reported  –  60% to 70% of Americans 65 or older will require assistance with getting around at some time.

Living longer = big chance of frailties’ and tells us no one can say they will or won’t “need help to get around”. Because of this, and especially in situations when professional help is needed for an extended period the “funds for the future”, which someone put together and most likely is small, can be put at a significant risk.

What to do? Buy Long Term Care insurance. Yes this important financial protection insurance is expensive but the funds many have put aside are small and the risk of having to pay the very expensive assistance costs directly is big. Then too, the cost of this  premium vs risk in comparison to the other kinds of insurance we have is lower!

What do others say about buying this special kind of long term health insurance? Ken Dychtwald, for one, has stated planning for your financial future is important and as a part of this Long Term Care insurance made sense to him because:

  • Independence can be maintained and he did not want to burden children financially or emotionally.
  • You can get quality care in the setting you choose.
  • You stay in control of your money, retirement assets, and your life.
  • Your spouse’s lifestyle and financial security can be protected, while you’re alive and afterwards.
  • An inheritance for your children and grandchildren can be protected.

John C Parker, RHU, LTCP

Niantic CT


Thoughts on not becoming a burden on family

 

The risk on going assistance with personal activities will be required following a change in heath tomorrow or in the future is quite high. What does this mean to you? It’s very expensive to hire professionals to come help you get around and thus can have a very big impact on your financial situation, if you don’t have the right kind of insurance,.

There are ways to avoid a common question, which comes up when paying for expensive help – how did I end up here. How? Meet with John C Parker to review the long term health insurance options in Connecticut. Your interests will be discussed and help will be received to select appropriate coverage that meets your budget, provides peace of mind, and is hassle free so you won’t become a burden on family.

Having this conversation is a more effective approach then researching various options yourself and thinking – Oh there are too many choices – I can’t make a decision.

Another part of the conversation is to understand the value of owning this special kind of financial protection insurance vs the much more expensive approach of having to pay high cost assistance expenses yourself.

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Some of the benefits of owning Long Term Care insurance

   

One of the things about long term care services is so many people are needing help and thus the amount of support they are receiving is extensive. Much of this help is from family and friends.

The American Association for Long Term Care Insurance (AALTCI) recently conducted a survey on the amount of benefits paid just last year, by private insurance companies, to individuals who owned Long Term Care insurance. AALTCI found $6.6 billion in benefits were paid in 2012 to people with medical situations such as Alzheimer’s disease, stroke, arthritis, and cancer. These individuals received services in their home, in assisted living facilities, and in skilled nursing facilities.

AALTCI also found half of the newly opened claims in 2012 were for services received in a home and about two thirds of the benefit dollars paid went to females.

In addition to having needed services paid, when an individual owns Long Term Care insurance, it means they:

  • Will not face the significant physical and emotional issues, which happen when a family member has to be their full time care giver!
  • Have an ever growing benefit pool, through the power of compounding, to pay for services.
  • Can hire professional help and receive it in the living situation they want for as long as possible.
  • Can avoid becoming poor from quickly using up their savings nest egg paying for expensive help.

 

There are many aspects to long term care services, how this special insurance works, and what amount of coverage will best meet an individual’s interests in having choices, and their budget. An informative and insightful video, which explains all this, is available from Kiplinger’s. It is sponsored by John Hancock and has five segments.

You can learn more about the value received by owning this special kind of insurance on my web site –  http://longtermcareins-ct.com/