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Guarding Your Wealth for Seniors
Understanding Long Term Care Insurance: Part 4
By Jeffrey D. Voudrie, CFP
Feb. 1, 2006 - Today’s senior citizens are living
longer than ever, but as life spans increase, so do the needs for
additional care. The majority of today’s retirees will need some form of
special care as they age, whether that help is delivered in their own
residence, in an assisted living facility or at a nursing home. The cost
of such care is skyrocketing and many find they are unable to afford it.
Our recent series of articles has discussed this
situation in great detail, exposing the gap that exists between what
seniors need and what government programs actually provide. The best
way, by far, to fill this gap is with Long Term Care Insurance.
Long Term Care Insurance (LTCi) is an insurance
policy that covers your care when you can no longer perform at least two
of six daily functions. These ‘activities of daily living’ are bathing,
dressing, eating, toilet use, urine and bowel continence, and getting in
and out of a bed or chair.
Each LTCi policy works a little differently. Some
require you to cover the first 90 days of care before coverage begins,
while others waive that waiting period if the need is for in-home care.
Some pay so much per day, while others pay actual expenses up to a
certain amount. Some have care coordinators that arrange for all the
care, so you don’t see the bills or have to handle any paperwork.
Anyone seeking to purchase LTCi has to medically
qualify. The underwriters look at your health differently than if you
were applying for life insurance. LTCi underwriters are more concerned
about illnesses and diseases that are likely to keep you from caring for
yourself, not those that will cause death. Osteoporosis and diabetes are
examples.
Most companies have preferred rates for those in
excellent health, with normal rates for the rest. LTCi premiums are also
based on your age. That means the longer you wait the higher the premium
will be. There is a two in ten chance of needing long-term care after
age 50, a two in five chance after age 65, and a seven in ten chance
after age 75.
As a result, it is better to buy LTCi sooner as
opposed to later. This should be seen as a pre-retirement purchase. I
recommend strongly considering it around age 50.
There are many factors to consider when choosing a
LTCi provider. Since this coverage is so critical, only do business with
insurance companies rated at least AAA or AA by Standard and Poors.
Beware of companies that have just entered the market. Check how many
LTCi policies they have issued. If they haven’t issued LTCi policies for
at least 10 years and aren’t one of the major players, stay away.
Many companies (including some that are major
household names) entered the business, only to exit it a few years
later. Others don’t have the actuarial experience to properly price
policies and end up raising premiums. Either way the policy holders
suffer.
Don’t choose a company that has raised rates on
existing policy holders. Don’t choose a plan that requires you to buy
additional insurance every three years to protect yourself from
inflation. It’s better to have inflation protection automatically built
into the policy.
You get to choose how much coverage to buy. Don’t
purchase three years of coverage just because that’s the length of the
average nursing home stay. This is ridiculous! The majority of people
use LTCi to remain independent, at home, as long as possible. They get
LTCi because they don’t want to go into a nursing home! Get unlimited
coverage if you can afford it.
In my experience, the best Long Term Care insurance
company is General Electric (GE). They are the biggest kid on the block,
doing LTCi business since the 1970s. No one that has purchased a policy
from them has ever had a rate increase. GE sets the Gold Standard in
the industry.
Don’t try to save a few dollars by going with a
questionable company. This is insurance that could pay back 10-100 times
what it costs you. There’s a 50% chance you will use it. Don’t
skimp—what you save today may cost you much more down the road.
If you have a specific question or would like more
information give me a call toll-free at 1-877-827-1463 or go to
www.guardingyourwealth.com. You can also reach me by email at
jeff@guardingyourwealth.com.
About Guarding Your Wealth:
“Guarding Your Wealth” is a
nationally syndicated weekly personal finance column written by Jeffrey
D. Voudrie, CFP. Mr. Voudrie is the President of Legacy Planning Group,
a private wealth management firm that employs sophisticated proprietary
strategies designed to protect and grow its clients' investments. Please
visit his website,
www.guardingyourwealth.com to read past articles under the Guarding
Your Wealth Article Archive.
Guarding Your Wealth for Seniors are
a collection of columns by Voudrie that deal with issues of particular
interest to senior citizens. Click here
for all columns.
In addition to being a nationally
syndicated columnist and Certified Financial Planning Practitioner, Mr.
Voudrie provides personal, private money management services to clients
nationwide.
Looking for an energetic expert who
is passionate about financial and wealth management? Mr. Voudrie is an
excellent speaker who will excite and inspire your audience. Mr. Voudrie
is available for a limited number of speaking engagements, television
appearances and radio talk shows. For booking information, email e-mail
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