"short And Fat" Ltc Policies Beat "long And Skinny" Ones

Long term care insurance policies have an important component called a benefit period which greatly affectspremium costs. This article discusses what I call "Short and Fat vs. Long and Skinny LTC Policies".

That is right -- Short and Fat LTC policies! So what is a benefit period anyway?

The benefit period is the number of years that ONCE you go on claim (need help in bathing and dressing or have some cognitive impairment (Alzheimer's or similar ailment) that the insurance company will pay the daily or monthly benefit that you chose when you applied for the policy.

So if you bought a benefit period of say 5 years, once you qualified for benefits, and satisfied the deductible (how many days of care that you need to pay out of pocket), the insurance company will pay those benefits for a maximum of 5 years in this case.

The benefit period, whether a set number of years, say 6 years for example or unlimited years are the MAXIMUM amount of time, if you used your FULL chosen daily or monthly benefit that your policy would pay on a claim.

If you had Alzheimer's for 9 years, the policy benefits would have been exhausted after those 5 years and you would be paying for the last four years from your own money.

Most insurance companies have a number of benefit periods to choose from. Typically they are 2, 3, 4, 5, 6, 7, or 10 years OR an Unlimited benefit period (say you went on claim for 35 years due to being in a wheelchair or something).

Most LTC policies have at least four or five different benefits periods from the above choices which you can choose from for your policy.

The benefit period, whether a set number of years, say 4 years for example or unlimited years are the MAXIMUM amount of time, if you used your FULL chosen daily or monthly benefit that your policy would pay on a claim.

Now for the "Short and Fat" part...

Long ago there wasn't too much difference in the premium prices for a 5 year benefit period compared to an Unlimited policy. So since there wasn't much of a cost difference, many clients chose the Unlimited benefit to protect against a HUGE potential disaster of needing help in bathing/dressing, etc. for DECADES -- not just a few years.

But today, there is a much larger difference in the premium prices for unlimited. So what to do?

First of all let me say that one of the largest LTC insurance companies has statistics that show that only 11% of their claims last longer than five years. Of course this means that about 90% of the claims last shorter than five years. So the odds are very much in favor of never needing a policy that would pay unlimited years.

So compared with a policy that offers an Unlimited benefit period, you can get a much higher daily/monthly dollar benefit that you are MUCH more likely to actually use and benefit from. Any unused dollar benefits will extend the number of years of your benefit period and not be lost.

Also you are much more likely to use a higher dollar amount for 2-4 years than having to pay extra money out of your pocket during care with a benefit period that is probably never going to be reached.

But... if you are pretty young (30-55) an Unlimited policy still might be a choice to look at. Older ages will find Unlimited years of benefits very expensive and there is likely a better way to structure a policy.

So knowing the above statistics, would it make more sense to you to have a Short and Fat policy (one with a larger daily or monthly dollar benefit for a shorter period of time)verses... a smaller daily or monthly dollar benefit for a longer period of years?

I'd put my money on Short and Fat!!

So if you would normally consider a policy that pays $150 per day for 7, 10 years or an Unlimited benefit period... you MIGHT seriously consider a policy that would pay $180-$200 per day for three to five years instead.

No sense in paying money out of pocket during the 3-5 years you are most likely to remain on claim.

Keep in mind that in 20 or 30 years the compounded inflation policy rider will work in your favor by giving you much more purchasing power to pay for care by starting out with a bigger initial benefit!

The odds are pretty good that the insurance company will pay more out for your care under these conditions.

Long Term Care Insurance Should I Get This?

Yes, you may want to consider a long term care insurance plan if you don’’t want to drain your retirement savings and other investments in the future! It is currently estimated that nursing home costs are more than $10,000 per month. Imagine, how much this will cost you on an annual basis if you had to pay this money out of your pocket if you needed care from a nursing home! This would be financially devastating without long term care insurance.

Did you know that prior to the passage of the Deficit Reduction Act of 2005, most Americans were able to count on Medicaid to assist them with long term health care. The Deficit Reduction Act changes all of that. This new law places the majority of long term health care costs on you, especially if you have assets. Unfortunately, middle class Americans will be hit the hardest with this new law.

How does the Deficit Reduction Act affect me if I need nursing home care and have assets? Well, for the most part, you will need to exhaust your assets before you will be eligible for Medicaid. Under this new law, there is a five year look back period from the date that you apply for your Medicaid benefits. This five year look back period, is to ensure that you have not transferred assets to relatives, friends, or other individuals. If you have transferred your assets to someone, Medicaid will count this against you and you will have a period of penalty wherein you will not qualify for benefits. Basically, this means that you could be out of money and Medicaid will not pay for your nursing home care!

The other side of this new law is that even if you have not transferred your assets to someone, you cannot have more than $500,00 in home equity. The majority of your assets including trusts and annuities are viewed differently under this new law.

It is important, that you consider long term care insurance as part of your retirement planning. With passage of the Deficit Reduction Act of 2005, it is a must! Unless you are independently wealthy and don’’t mind coming out of your pocket with more than $10,000 per month for your prospective nursing home care! For the average person, this would be a severe financial hardship.

What age should I consider getting a long term care insurance plan? You may want to consider in your early to mid fifties. However, it is recommended that you consult your insurance agent or financial advisor about this.

Planning is important, in order to assist you in eliminating a potentially devastating financial disaster. You want to live out the golden years of your retirement as stress free as possible. So make sure you plan for your future long term health care needs!

Insurance Made Easy: A Guide For The Consumer

For most of us, insurance coverage represents a love-hate relationship. We hate paying for the premiums, but love having the right kind of coverage when it is needed. We realize that is important to have insurance coverage, but just the thought of contacting different insurance agents, or researching different insurance plans, can not only be a scary experience, but incredibly overwhelming. Knowing what types of insurance are available, and making sure you have the correct coverage for your life’s needs is a task that should be given careful consideration.

Using the following suggestions, whether you are a novice or a veteran insurance buyer, will help you to make critical insurance coverage decisions. First and most important, is to ask yourself the question; what kind of insurance do I need? There is auto insurance to protect yourself and others when driving. Health coverage is a vital issue to address, as well as life insurance, disability and long-term health care. If you have a home, you need to protect your most valuable possession with home-owners insurance. There are many types of insurance for each of the categories mentioned. Asking the right questions can make all of the difference in deciding on the policy that fits you best.

Auto Insurance

Auto insurance is required in most states. You may not be required to carry full coverage, which includes collision, comprehensive and medical coverage; but you are required to carry liability coverage. Liability is the foundation of any auto insurance policy. If you are at fault in an accident, your liability insurance will pay for the bodily injury and property damage expenses caused to others in the accident, including your legal bills. However, if your vehicle is damaged, the expense to repair it will not be covered without having a full coverage policy. Collision, comprehensive and medical coverage are for your benefit. Collision will pay for the repair to your vehicle, while comprehensive coverage will pay for damages to your car that weren’t caused by an auto accident. Medical payments coverage will pay for you and your passenger’s medical expenses after an accident. This coverage will pay no matter who is at fault.

Collision coverage is usually the most expensive part of a policy, you can choose a higher deductible, say $500 or $1000, and keep your premium costs down. If you have a newer vehicle and have a lien against it, the lending institution will require that you have full coverage. By working with a professional insurance agent, the agent would be able to give you many cost saving suggestions that you could take advantage of to lower your rates, and still give you the coverage you need.

Health Insurance

Health insurance is one of the largest expenses that we face today. Educating yourself about the different types of health insurance available will assist you with your insurance buying decision. There are many types of plans, but essentially two kinds of health insurance: Fee-for Service and Managed Care.

Fee-for-Service assumes that the medical professional will be paid a fee for services provided. Managed Care encompasses various plans and can include: health maintenance organizations (HMOs), preferred provider organizations (PPO), or point-of-service (POS). These plans provide comprehensive health services to their members and offer financial incentives to their members to use providers in their network. Health insurance is one of the least understood types of insurance; many people feel they do not need health coverage, but just one major illness or accident can force you into bankruptcy when you can’t pay your bills. This is why you need to understand all the different types of plans available and what plan would best suit your needs and budget. Meeting with an insurance professional and asking the right questions, can save you many sleepless nights of worry and provide you with some peace of mind.

Life Insurance

There are some basic things to consider when you are assessing your life insurance needs. You should first consider your financial situation and the standard of living you would want your dependents or survivors to maintain. Would you want a policy that would cover funeral expenses and final medical bills, or do you have a family to consider where your coverage would also pay outstanding debts, child-rearing expenses, and educational costs? There are two main types of life insurance available. They are Term Life and Permanent or Whole Life.

Term provides death benefit protection for a specified period of time. You can buy a policy in increments of 10, 20 or 30 years. These are usually less expensive, but your rates can increase each time you renew your policy. With Permanent, the costs of the policy are stretched out over a longer period of time, usually spread out over your entire life. Permanent can also be used as a savings vehicle. Once the premium has been paid, the company invests the additional funds. It’s a very important choice as to what insurance company you choose. A knowledgeable and experienced agent can answer all of these and your personal questions about life insurance.

Disability Insurance

Is disability insurance really necessary? Many of us can easily become sick or disabled tomorrow and not be able to work for two or three months. Would you have enough savings to cover your living expenses? There are two types of disability insurance. Short term and long term disability.

Short term will pay you a percentage of your salary for a short period of time. These policies are usually not very expensive, and usually cover a period of three to six months. Long term disability insurance picks up where your short term leaves off. Long term will pay a percentage of your salary until you are 65 years old. Disability insurance can be costly when you by it on your own, but it should be a part of everyone’s financial plan. It could easily be argued that you need disability coverage more than life insurance.

Long-term care Insurance

Another form of insurance that people around 50 years of age should consider is long term care insurance. There are many confusing forms of this insurance, but it essentially covers costs you would incur when you can no longer perform activities of daily living, such as dressing yourself, bathing yourself, or the need of skilled nursing care at home or in a care facility. Medicare and Medicare supplemental insurances don’t cover most long term care expenses. This is a very important insurance, you would need the help of an insurance professional, one who specializes in long term care insurance, to make sure you have the best coverage to fit your long term care needs.

Homeowner’s Insurance

If you are a homeowner and you have a mortgage on your home, your lender requires you to have homeowner’s insurance. There is much more to consider than how much your coverage will cost, you need an adequate policy that will give you the right level of protection; plus special provisions for your valuables and other possessions. You may need additional coverage for things such as earthquakes or floods. Before you get a policy, you will need to take an inventory of what you have in your home. Know what your insurance limits are, learn the difference between replacement-cost and actual-cash-value coverage. Again, consulting with an insurance professional and one who will listen and understands your specific needs is essential.

With all of the different types of insurances available, it is best to be prepared when selecting a policy. Choosing the wrong insurance policy can have disastrous consequences for both you and your family. There are many decisions that need to be made when looking for insurance, such as deciding what type of insurance you would need, and also considering what you can afford. You want to be able to speak to an insurance agent who will not pressure you or try to sell you insurance coverage you do not need. A professional can suggest and compare different plans and advise you which plan would best fit your own unique needs. All the while, offering this service at no cost to you.