Another way of handling long-term care insurance
There is a 70% chance that an individual in the U.S. will need some type of long-term care (LTC) during their lifetime. Unfortunately, private health care policies and Medicare will not cover these expenses.
Traditional LTC insurance policies can cover some of these expenses. Other “asset-based” insurance options are available that would cover some of these expenses.
In order to receive benefits from LTC care policies, you need a doctor to confirm that you need assistance in one of two categories. The first category is related to six basic daily activities, including eating, bathing, dressing, toileting, continence and mobility. If an individual requires assistance in two of these activities, then the insurance would cover some expenses. The second category is related to cognitive impairment, such as Alzheimer’s disease.
Many who have purchased traditional LTC policies have learned that the premiums associated with them are not fixed. Just about every insurance company that has sold traditional LTC policies has found that it underestimated the benefits it would have to pay policyholders based on the terms of the original policy. LTC insurers have gone to the state insurance departments and received approval to increase premiums.
In some cases, the premiums have increased dramatically. In this situation, the policyholder can either terminate the policy or accept lower coverage for the premium they had been paying. Most companies that sold traditional LTC insurance no longer sell new policies.
I receive a lot of mail from readers who had purchased traditional LTC policies and understandably have much to complain about. No one has ever indicated to me that the insurance agent who sold the policy explained that the premiums were not fixed and they should expect subsequent premium increases.
Fortunately, asset-based insurance policies are an option for insuring against LTC expenses; benefits are guaranteed, and there are no premium increases. Asset-based policies combine LTC insurance benefits with life insurance benefits or cash-value annuities. These are also known as hybrid insurance policies. With these policies, if LTC is not required, the premiums can be returned to the owner or beneficiary. That is not the case with traditional LTC policies.
In many of my columns related to annuities, I consult expert Stan Haithcock (stantheannuityman.com). For those interested in LTC insurance, Haithcock recommends Jack Lenenberg, an attorney and the head of LTC Partner. Lenenberg is an expert in all phases of long-term care insurance and is recognized as one of the most knowledgeable experts in this field. He works with all of the insurance companies who issues these policies. Lenenberg recently appeared in a podcast (“Fun with annuities,” episode 57) on Haithcock’s website, in which he discussed the advantages of asset-based insurance options.
Lenenberg pointed out that if you apply for asset-based coverage, you would be applying by phone, with no examination required, and normally you would be approved within three days. With a traditional LTC policy, the approval process would take four to six weeks.
The bottom line is that if you are in good health and are interested in LTC coverage, you have other options besides a traditional LTC policy.