A Quick Look At Ltc Plans On The Market

By Dennis Jarvis

We’re going to provide a general overview of what makes up a standard Long Term Care plan and then more importantly, we’re going to provide some guidance on plans we feel offer some of the best cost to value breaks on the LTC market.

First, let’s take a quick look at what comprises a Long Term Care plan. LTC is basically a promise to pay for health care expenses or pay you cash directly in the case of extended needs. These needs are not covered by health insurance plans or Medicare. The expenses can range from full-blown nursing care to more day to day custodial care. When comparing the plans, what we’re really analyzing the constraints on this care and the premium costs to offer this protection. There are a couple of key constraints we should concentrate on when comparing these plans.

Our ultimate goal is to attain the most benefit amount possible for the lowest possible premium. I know that sounds self-explanatory but Long Term Care insurance is different from most other types of insurance where the benefit is defined by the cost. For example with health insurance, the plan (of any worth) will usually pay a percentage of the obtained cost. With LTC, we need to choose an amount of benefit up front. This can be tricky as we’re not sure of what the actual expense will be. The best we can do is look at today’s average costs for our area and extrapolate out what that expense might be at the time we expect LTC costs (say between age 70-85). So, is it as simple as quoting the plans side by side and choosing the lowest premium for a given amount of benefit? We wish.

There are a couple of key policy settings to choose from when comparing plans. These are the constraints mentioned above. The first is waiting period. If you had coverage from day 1 of qualifying for benefits, the cost would probably be prohibitively high. In response, the carriers added waiting periods to bring the costs down. This is a period of time after qualifying for benefits but before the benefits start. The second constraint is length of benefits. This basically dictates how long your daily or monthly Long Term Care benefits will last. Indefinite or lifetime will be the most expensive of course and we can reduce the monthly premium by limiting the length of time that you will receive benefits. So benefit amount, benefit length, and waiting period. These are constraints we can choose up front to affect the premium amount we pay for insurance. Are there other key concerns? Yes.

The two over-arching constraints are inflation protection and type of pay-out. Infation protection might sound like some kind of add-on just there to increase the carrier’s margins but depending on the insured’s age, the risk can be real. Inflation can eat up your planned benefit so protection from it can be a valuable concern. The other main constraint is type of pay-out. We’ve saved the most important consideration for last. This basically dictates how and when the benefit will pay out. This really is the first decision to make. Some policies may only payout for nursing homes while others will pay out for home health care. There’s even a new wrinkle with benefits that will pay out cash. This brings us to our second part…ideal plan settings and options on the market.

First, we recommend quoting based on $120 daily benefit (or $3600 monthly), 90-100 day waiting period (explanation here on medicare and LTC); 3 years of benefit (addressing average length of LTC benefit). If you’re under age 65, compound interest becomes important. Between age 65 and 75, simple interest. Over age 75, no inflation. Finally, our favorite option now is nursing/home hybrid care with a cash benefit built in. The cash benefit, although 40-50% of daily benefit, can start from day 1 which is amazing in terms of flexibility. You can then switch to home health care after the chosen waiting period. We’re happy to run a quote to match this make-up for you.

About the Author: Dennis Jarvis is a licensed Long Term Care insurance broker with extensive knowledge of the LTC plan market. Quote Long Term Care Insurance

Source: isnare.com

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