The good news is we are living longer than prior generations! If you were born just 100 years ago, your life expectancy was only an average age of 47. Nom a child born today has a life expectancy average of 77 years, a 30 year increase.
With the good news, comes the news from the Federal Office of Personnel Management that in 2003 concluded a sobering 60% of the population will need some type of long term care. Think about it in real terms. You have ten members in your company management team; six of you will require some type of long term care (LTC) as a part of their future living expense planning during your lifetime. Just four of these educated professionals will not require funding this expense in during their lifetime. You may need to do more financial planning than just to max out your 401(k)!
Reality is only a fraction of the 60% of the population that is identified as at risk for incurring long term care expenses has taken action to protect hard earned assets from this substantial future liability with insurance.
We are having on average substantially smaller families than 100 years ago, so there are fewer potential care givers adding to the long term care management issues.
Why are so few insured? Perhaps it is perspective that it can't happen to me combined with the in place status quo by making it mandatory to get insurance to get something else you really want.
Do you have auto insurance? Of course you do! Why? Well, initially in order to secure a loan on the vehicle, the lender required it. Then the state often insists you show proof of coverage before you can legally obtain tags. Only 7% of you on average will have a car accident this year, but 100% of you driving legally are insured. So if only 7% of you will have a loss, why are 100% of you insured? It's mandatory! How much are you paying in annually in auto premiums?
Do you have homeowners insurance? Most will say yes. Why? Likely a loan is in place with a lender requiring it to protect their interests, its mandatory! Many will keep the coverage in force even when a home had been paid for because there is a fear of losing everything you have to a catastrophe. The reality, only about .5 or one half of one percent of you will have a home fire this year. How much do these premiums cost?
What about life insurance? It has been proven since time began all people die at some point leaving families, jobs, businesses, debts and unfunded dreams behind, often without warning. Yet, with a 100% certainty that death will occur, not everyone secures life insurance because it is voluntary. Your lifetime earning power and physical presence will generally be your biggest asset and sadly most of you reading this will pay less for life insurance and have a lower percentage of coverage on yourself than these other listed possessions.
The key to securing LTC coverage is designing a plan that compliments what other resources you already have in place. This is not a matter of waiting until you are retiring either. Long term illness or accident recovery can affect those still in prime working years too, and does. If you doubt the validity of working adults needing long term care, spend a day sitting outside a local rehabilitation center. Make a note of the different ages that pass through the doors and their wide variety of disabilities requiring therapy. Who is providing the transportation and assistance to make the appointment?
Still scoff? Ask a therapist about their youngest to oldest patients. National market surveys have shown the average cost for a year in an assisted living facility is $34,860. Upgrade to a nursing home environment and the cost soars to an average of $74,095 a year. That figure does not include time off work for your support person, likely a spouse or adult child, transportation or other expenses.
The number one objection for not buying LTC is cost. Adults question the benefit versus the costs. Plus the whole subject terminology can be upsetting or confusing. How much coverage you secure will be the determining factor on pricing. Certainly a lifetime benefit will be more costly than a one, two or three year benefit policy. But, really how much statistically is "enough?"
A comprehensive study by Milliman the leading national long term care insurance actuarial and product development firm concluded that for the vast majority of insured's, a three year benefit may very well be ?enough?. Why? Only 8 in 100 claimants exhausted their three year policy benefits.
The study examined over 1.6 million in-force policies to reach this conclusion. Only 14.4% of closed long term care claims lasted longer than 24 months, while 33.2% of still open claims lasted longer than 24 months.
Only 5.6% of closed claims lasted longer than 36 months. 16.2% of open claims lasted more than 36 months.
There are basically two types of policies.
One type is a traditional reimbursement plan, and pays much like your health insurance. First you incur the expense, submit it to your carrier for verification of what is covered, then payment is made and you remit the remainder not covered by your policy. In these types of situations, someone must devote a lot of time to keeping track of your every medical related expense, and then be diligent in submitting each and every days worth for consideration and reimbursement, then remitting payment as needed. This can be a very time consuming task for someone else because it is unlikely you will be able to do this for yourself. Some exhausted family members equate the managing of the care giving, submission of claims to all the involved insurers and finally management of the payments for all services provided to more than a full time job.
The second newer type is a cash benefit policy. It pays benefits if you cannot perform two adult daily living activities. It is much simpler to administrate in every way. You need not prove what you are spending the money for. The check arrives once a month.
This is an improvement over the older policies because it dramatically lessens the time and book keeping burdens on care givers by eliminating the submission, reimbursement, payment and tracking steps.
Either plan could be a good "fit" depending on what you need in place to compliment what you already have. You may require a modest $50 a day to be ?enough?, or about $1,500 a month. Most policies will have a benefit ceiling of about $9,000 a month. This is the limit the insurer is willing to take on any insured.
LTC policies can also be an excellent alternative, or supplement to a traditional disability policy for high earning professionals. In many cases, for a successful attorney or physician, they must secure multiple policies from several different carriers to cover their income levels, so the addition of a LTC policy could enhance their existing program for a fraction of the cost of a similar dollar benefit traditional disability plan.
LTC premiums may also be 100% deductible on your taxes, where private disability coverage is not.
For married couples without coverage, the reality could be that you impoverish one spouse for their remaining lifetime to support the other in LTC for only a few years.
For singles, LTC can be a way to secure a standard of living when you do not have a spouse or children to rely on for financial or assisted care help.
Every LTC situation will be unique. Consult a professional to design a plan for you without delay. Remember the majority consisting of 60% of you reading this will need the coverage. Do you have yours yet?
It has been proven that some LTC asset protection will prove for claimants to be better than none in every situation.