Overview of Long Term Care (ltc) Insurance

OVERVIEW OF LONG TERM CARE (LTC) INSURANCE

• Higher net worth individuals often consider "extended health care", as a personal risk for which they can self insure or insure with third party LTC coverage.  
• Long-term-care insurance can be risky and is often viewed as an expense rather than an investment.  
• Traditional LTC insurance premiums can be high and may not be returned to you, if you end up not needing care.  
• No guarantee that premiums will remain the same in the future.  Increased premiums may force you to drop coverage.  
• Many policies also have clauses that can keep you from collecting.  

FACTORS TO CONSIDER

1)  Use a Highly Rated Carrier – When purchasing a LTC Contract, you take the risk that your insurer may not be in business 20, 30, or 40 years from now when you need the coverage.  We suggest using a very highly rated carrier to alleviate the risk of the provider going under.  

2)  Age of the Insured – Coverage generally is not needed until closer to age 70-80.  It is difficult to determine if a policy purchased now will be obsolete by the time it is needed.  Given you are both still young, it may be prudent to put off purchasing coverage until you are closer to needing it (age 60-65).

3)  Flexible Policy - To qualify for LTC benefits, the insured must be unable to perform a certain number of “activities of daily living” (ADL).  You want to pick a policy that requires no more than two such activities.  Also, you want a policy to cover care not only in nursing homes but also in assisted- living facilities.  A home-care benefit should include adult day care, hospice services, and respite care (temporary overnight care).

4)  Inflation Protection - Many policies offer inflation protection (your benefit will increase with inflation - generally 5% compounded annually).  Since you may not start taking benefits for many years, you want the policy to account for rising long term care costs.