As many of our clients know, I have retained Allen Hamm of Superior LTC Planning Services, Inc. to assist our clients with planning for long term care. Our clients who have utilized this service have given us high marks about the service, its benefits and the experiece of working with Allen. (If you haven’t seen the recording of the short webinar that Allen did for our clients that explains the services available to our clients, you can view it by clicking on this link: Long-Term Care Webinar. There’s no charge to you for these services because we pay his fee as a way of adding value to our relationship with you.)
Recently, I went through a long-term care planning analysis with Allen. I wanted to have the same discussion he has had with many of our clients and I wanted to go through this analysis because I wanted clarity on my best option for paying for a potential long-term care need.
Allen explained, there’s 4 ways to pay for long term care: Rely on Medicaid, the welfare program; rely on family members; rely on your assets; or rely on LTC insurance. Obviously, the first two options (welfare and family) are not viable for me--I wouldn’t choose one of those even if I could. So the analysis came down to choosing between relying on my assets or relying on LTC insurance.
During the process, Allen asked several questions designed to help me get clarity on my personal odds of needing long-term care. Even though the government and the insurance industry offer lots of “general statistics” related to the odds of needing care, what’s more relevant are my personal odds. We talked about my genetic history and whether or not the need for care is prevalent in my family. The answers to those questions were mixed. But longevity appears to be something I’ll face, for better or for worse: I take reasonably good care of myself, and my father is healthy as a horse and he’s in his mid-80s.
By the end of the analysis, we concluded that my personal odds of needing care are at least reasonable. So how would I pay for it?
Like all small business owners, my focus is on serving my clients well and so my major asset is Bernhardt Wealth Management. That’s likely to remain the case over the coming decades. So one option for paying for care could be to use the assets I’ve accumulated from my business or to take income from the business to pay for my care. After thinking about it, I’m not completely comfortable with that option, at least for now. I’ve decided that I can better protect myself and my firm by relying on LTC insurance. But I’ll be talking with Allen at least once a year about this decision, reviewing the insurance coverage and discussing whether or not changes have taken place in my life that warrant making a change. In other words, having the insurance puts me in the driver’s seat: the insurance company can’t cancel the coverage but I certainly can if my circumstances change.
If any of you have not yet gone through an LTC planning process with Allen, I encourage you to do so and believe you’ll find it valuable. He can conduct a policy audit of an existing policy, explain what you have, and/or look at options you should consider. Let me know if I need to coordinate a conference between Allen and you.
Showing posts with label Long Term Care Insurance. Show all posts
Showing posts with label Long Term Care Insurance. Show all posts
Friday, March 16, 2012
Friday, November 12, 2010
CAUTION: Long-Term Care Insurance through Your Employer!
Long-term care insurance (LTC) pays for the things Medicare does not--assisted living, in-home care, adult daycare and nursing homes. One of the biggest trends in LTC insurance is group coverage sold through your employer, an association you’re a member of, or even through your bank or credit union. We’ve heard from clients who have asked us if they should buy group long-term care insurance.
First things first
The first step in LTC Planning is just that--planning! Bernhardt Wealth Management has retained the services of a nationally recognized expert in LTC, Allen Hamm and his company Superior LTC, to help our clients with planning for long-term care. There’s no additional charge to our clients for this service. Allen is the author of the book “Long-term Care Planning: Assuring Choice, Independence & Financial Security” which is available at Amazon online.
Allen uses a seven step LTC planning process and insurance may or may not be the best option for you. He starts by assisting you with understanding the implications of relying on each available option to pay for long-term care, not just insurance.
But let’s say that you’ve gone through this process and it’s been determined that LTC insurance is the best option for your particular situation. Is Group LTC insurance a good value for you? The answer is: Usually not, but there may be an exception.
Adverse Selection
Unlike most types of group insurance, LTC is usually more expensive than individually issued coverage. This is because group LTC insurance is normally issued on a guaranteed or modified guaranteed issue basis. This means that unhealthy individuals, who would not otherwise pass the underwriting requirements of the insurance company, can obtain coverage through the group. This causes “adverse selection”: a disproportionate number of people buying coverage through the group who are in poor health and likely to have early claims, resulting in higher premiums for everyone.
In future years, adverse selection can also cause premium rates to be raised more frequently and more dramatically than premiums for individually issued coverage. Rates on some older group policies have been raised to the point where people have been forced to cancel the coverage.
The consequences of adverse selection are particularly negative if you’re healthy. By purchasing group coverage, you’ll heavily subsidize higher premiums for those in poor health, and will continue to subsidize increasingly higher premium rates in the future.
“But the Premium Seems so Low!”
Group LTC coverage has the appearance of a lower premium than individually issued coverage, which is why it’s common for people to automatically jump to the conclusion that they should buy it. But when comparing the details and benefits apples to apples, group LTC coverage premiums are higher than individually issued coverage.
The initial appearance of lower premiums for group coverage has to do with the fact that group coverage does NOT include the automatic inflation protection benefit as a component of the base policy. Yes, you may be able to purchase additional coverage later through the policy’s Guaranteed Purchase Option, but the new benefits will charge a premium at your new attained age rate. Based on Mr. Hamm’s experience in auditing older group policies for clients, people normally don’t exercise the option to increase their coverage, due to the increasing higher premium. In fact, people rarely revisit the group LTC insurance decision until several years later, after premiums have gone up dramatically.
Is Group LTC Coverage Ever a Good Value?
If you’re not in good health and you’re unable to qualify for individually issued LTC insurance, group coverage may be a viable alternative for you. But when people are educated about the higher premiums, the likelihood of increasingly higher premiums in future years, and the limited coverage options available through group coverage, they usually choose an option other than insurance as their plan for long-term care. The rare exception is if you have a strong desire to obtain coverage due to health conditions that make the odds of you needing long-term care very high.
Summary
Planning for long-term care can be confusing. If you haven’t yet developed a plan for long-term care or if you’re being offered group LTC insurance, please contact your independent advisor to begin the planning process . LTC insurance may not be the best option for you and your family - so paying for it, even at low cost, is a bad investment.
First things first
The first step in LTC Planning is just that--planning! Bernhardt Wealth Management has retained the services of a nationally recognized expert in LTC, Allen Hamm and his company Superior LTC, to help our clients with planning for long-term care. There’s no additional charge to our clients for this service. Allen is the author of the book “Long-term Care Planning: Assuring Choice, Independence & Financial Security” which is available at Amazon online.
Allen uses a seven step LTC planning process and insurance may or may not be the best option for you. He starts by assisting you with understanding the implications of relying on each available option to pay for long-term care, not just insurance.
But let’s say that you’ve gone through this process and it’s been determined that LTC insurance is the best option for your particular situation. Is Group LTC insurance a good value for you? The answer is: Usually not, but there may be an exception.
Adverse Selection
Unlike most types of group insurance, LTC is usually more expensive than individually issued coverage. This is because group LTC insurance is normally issued on a guaranteed or modified guaranteed issue basis. This means that unhealthy individuals, who would not otherwise pass the underwriting requirements of the insurance company, can obtain coverage through the group. This causes “adverse selection”: a disproportionate number of people buying coverage through the group who are in poor health and likely to have early claims, resulting in higher premiums for everyone.
In future years, adverse selection can also cause premium rates to be raised more frequently and more dramatically than premiums for individually issued coverage. Rates on some older group policies have been raised to the point where people have been forced to cancel the coverage.
The consequences of adverse selection are particularly negative if you’re healthy. By purchasing group coverage, you’ll heavily subsidize higher premiums for those in poor health, and will continue to subsidize increasingly higher premium rates in the future.
“But the Premium Seems so Low!”
Group LTC coverage has the appearance of a lower premium than individually issued coverage, which is why it’s common for people to automatically jump to the conclusion that they should buy it. But when comparing the details and benefits apples to apples, group LTC coverage premiums are higher than individually issued coverage.
The initial appearance of lower premiums for group coverage has to do with the fact that group coverage does NOT include the automatic inflation protection benefit as a component of the base policy. Yes, you may be able to purchase additional coverage later through the policy’s Guaranteed Purchase Option, but the new benefits will charge a premium at your new attained age rate. Based on Mr. Hamm’s experience in auditing older group policies for clients, people normally don’t exercise the option to increase their coverage, due to the increasing higher premium. In fact, people rarely revisit the group LTC insurance decision until several years later, after premiums have gone up dramatically.
Is Group LTC Coverage Ever a Good Value?
If you’re not in good health and you’re unable to qualify for individually issued LTC insurance, group coverage may be a viable alternative for you. But when people are educated about the higher premiums, the likelihood of increasingly higher premiums in future years, and the limited coverage options available through group coverage, they usually choose an option other than insurance as their plan for long-term care. The rare exception is if you have a strong desire to obtain coverage due to health conditions that make the odds of you needing long-term care very high.
Summary
Planning for long-term care can be confusing. If you haven’t yet developed a plan for long-term care or if you’re being offered group LTC insurance, please contact your independent advisor to begin the planning process . LTC insurance may not be the best option for you and your family - so paying for it, even at low cost, is a bad investment.
Monday, August 9, 2010
Controlling Risk Mandates a Long-term Care Insurance Review
A note from a client thanking me for providing a complimentary long-term care (LTC) insurance policy review prompted me to think how a LTC review would be useful for many others.
Although you may have always figured your nest egg could cover your healthcare costs in retirement, the recession and continued volatility may require a re-evaluation of that assumption. With growth prospects low, LTC insurance may be an attractive risk-reduction strategy. Ironically, however, as consumers’ need for LTC insurance has increased, the recessionary environment has prompted insurance companies to re-assess their own risk levels, making the coverage more difficult and expensive to obtain.
Long-term care refers to the help you receive for a chronic illness, disability, or cognitive impairment that leaves you unable to care for yourself for an extended period of time. These services can be provided in a nursing home, assisted-living facility, or in your own home. Typically not covered by your health insurance, LTC can be expensive. In fact, a recent study by Genworth found average costs to be $74,208 a year, or $203 a day. Of course, these rates vary by region of the country.
So, should you buy LTC insurance and, if so, when? Cost has long been the reason for putting off purchasing LTC insurance until a decade or two before retirement. However, in this financial environment, the reasons for acquiring LTC coverage earlier in your adult life are compelling. In the midst of market uncertainty, adding a LTC policy can provide inflation-adjusted, guaranteed income for your healthcare needs later in life.
If you’re interested in determining if it’s still reasonable for you to self-insure or whether your existing LTC policy still meets your needs, please contact me. The LTC market is in constant flux and our consultant, Allen Hamm, is well-versed in everything from the newest riders to the financial stability of the insurance companies. In addition to ensuring you understand the coverage you are buying, Allen is also available to act as your advocate to protect your rights as a policyholder should you ever have a claim.
Although you may have always figured your nest egg could cover your healthcare costs in retirement, the recession and continued volatility may require a re-evaluation of that assumption. With growth prospects low, LTC insurance may be an attractive risk-reduction strategy. Ironically, however, as consumers’ need for LTC insurance has increased, the recessionary environment has prompted insurance companies to re-assess their own risk levels, making the coverage more difficult and expensive to obtain.
Long-term care refers to the help you receive for a chronic illness, disability, or cognitive impairment that leaves you unable to care for yourself for an extended period of time. These services can be provided in a nursing home, assisted-living facility, or in your own home. Typically not covered by your health insurance, LTC can be expensive. In fact, a recent study by Genworth found average costs to be $74,208 a year, or $203 a day. Of course, these rates vary by region of the country.
So, should you buy LTC insurance and, if so, when? Cost has long been the reason for putting off purchasing LTC insurance until a decade or two before retirement. However, in this financial environment, the reasons for acquiring LTC coverage earlier in your adult life are compelling. In the midst of market uncertainty, adding a LTC policy can provide inflation-adjusted, guaranteed income for your healthcare needs later in life.
If you’re interested in determining if it’s still reasonable for you to self-insure or whether your existing LTC policy still meets your needs, please contact me. The LTC market is in constant flux and our consultant, Allen Hamm, is well-versed in everything from the newest riders to the financial stability of the insurance companies. In addition to ensuring you understand the coverage you are buying, Allen is also available to act as your advocate to protect your rights as a policyholder should you ever have a claim.
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