“Ten Things Life Insurance Agents Won’t Say”- Thing #10: “Our Long Term Care Coverage Isn’t So Great (for you or us)”

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Posted Dec 17

#10:   “Our Long Term Care Coverage Isn’t So Great (for you or us)”  IS LAST IN MY SERIES OF RESPONSES TO “10 THINGS LIFE INSURANCE AGENTS WON’T SAY” BY DANIEL GOLDSTEIN “PERSONAL FINANCE REPORTER” FOR MARKETWATCH.

I guess Mr. Goldstein ran out of fabrications for life insurance agents & is shifting to long term care insurance (LTCi) agents.  And “shifting” is the key word:  remember thing #1, Americans are buying too much life insurance?  Now we shift to the exact opposite criticism, the supposed rotten thing about LTCi is that Americans aren’t buying enough of it.  Why would that be?

I suspect it is not being properly structured by the agent.  In the old days I always recommended lifetime coverage because of the utterly financially devastating possibility of being on claim for 20 years.  Now, lifetime coverage is literally unaffordable in most budgets.  Plus, the average nursing home stay has fallen dramatically from 3.5 years to 13 months.  (Key caveat:  “Average” applies to no one.)  Here are the most important pieces to build an adequate, affordable LTCi plan:
  • Compliance with your State’s Partnership Program, the two main features of which are:
    • Inflation protection is required (depending on age group)
    • Enhanced asset protection- in a nutshell, to the extent you collect benefits from private LTCi, your asset thresholds to qualify for Medicaid, and for exemption from Medicaid recovery after you die, are increased.
  • Partner or Spousal discounts.  Companies recognize that insureds who don’t live alone will need less care.
  • No more than a 5 year benefit period.  This will cover the Medicaid look-back period for transfer of assets.
  • At least a 90-day Elimination period, the length of time you must wait- after going on claim -for benefits to begin.  If you can’t afford to fund your first 90 days of expenses then you probably can’t afford LTCi.
  • A Cash benefit.  Most LTCi policies are indemnity plans;  they reimburse you for expenses incurred.  Cash benefits, on the other hand, are triggered by your poor health, whether you’ve incurred expenses or not.  This is a welcome benefit to help you through the 90-day elimination and to pay for excluded expenses.
  • Finally, if you can afford it, a “limited pay” policy, which is paid up in 10 years or less.  An endangered species, limited pay LTCi is really expensive.  But it’s bulletproof protection from future rate increases.  Because of the cost, hardly anyone does this outside of an executive benefits package.

If LTCi still has no room in your budget, there are great asset-based alternatives that don’t impact your budget at all.