N.P. Morith - Long Term Care Planning & Insurance Brokerage

Long-Term Care Insurance FAQs

Following are frequently asked questions regarding Long-Term Care Insurance. If your question is not addressed here, please email us by clicking on the button provided at the end of this section.

I'm reading more and more in the press about the importance of insurance coverage to protect against the high costs of long-term care. Since these policies are so varied and complex, how can I get help in figuring out what to do?

Look for a long-term care specialist. You can also do some reading on the subject.

NP Morith, Inc. specializes in long-term care planning and insurance brokerage and strives to turn clients into informed consumers. Since we represent most of the major long-term care insurance carriers, we can help you understand the different plans and choose the policy that works best for your unique circumstances.

I'm reading more and more about long-term care (LTC) insurance in the papers. But, I'm not a millionaire. How do I know if it's right for me?

Your assets are only one factor in deciding whether LTC insurance is an appropriate purchase for you. You will also want to be sure that paying insurance premiums doesn't limit your ability to meet basic living expenses. A reasonable guideline for most areas of the country would be annual income of at least $35,000 - $50,000 and assets of $100,000 or more (excluding the value of your home). Basically, the purchase of LTC insurance should not alter your lifestyle.

What are the real risks of actually needing long-term care?

According to the statistics: Roughly 2 out of 5 Americans over the age of 65 will need long- term care. Nearly 10 million Americans require some form of long term health care today. Seven in 10 couples (age 65 and older) can expect one spouse to need long-term care. Additionally, there is a 1 in 88 chance of needing home owners insurance, a 1 in 47 chance of having an auto accident and a 2 in 5 chance of needing long-term care. About 60 percent of the U.S. population will need long-term care at some point in their lives.

If I do need long-term care, won't Medicare pay for it?

Medicare only covers about 8.5% of nursing home care costs each year. It offers very little help, and only for a short time. Medicare Supplement plans usually only cover co- payments and deductibles of the limited benefits and services covered by Medicare. Medicare does not pay for custodial care if that is the only kind of care you require. Custodial care includes: assistance in walking, getting in and out of bed, eating, dressing, bathing and taking medicine. LTC insurance does cover custodial care and allows you the independence and flexibility you need in choosing where your care takes place--at home, in an assisted living facility, nursing home, etc.

I am considering long-term care insurance, but I'm not sure if I can qualify. I am being treated for a few medical conditions now. Just how great does your health have to be?

The answer will depend on what medical conditions you have or have had. Insurance companies will also want to know about ongoing prescription medication and the amount of time that has elapsed since either recovery from or control of a condition. Some people are surprised to learn that past medical problems such as open heart surgery or cancer will not necessarily prevent them from getting LTC insurance.

My husband was recently diagnosed with Alzheimer's disease. We just got back from our attorney's office and he suggested we call you to see if you can help us at all.

Unfortunately, serious conditions like Alzheimer's, that have already been diagnosed, make getting LTC insurance for that person impossible. Receiving this kind of news is devastating, of course, but don't overlook your needs in your efforts to help your spouse. You should be applying for LTC insurance now for a number of reasons. If something happens to your health or you become injured, your spouse will be unable to help you. You are going to need some money coming in to cover your care even more than ever. There is also the increased likelihood that you may be alone in later life and you need to be sure you can hire someone for whatever care needs you may have at that time. Other financial products exist that can help fund your husband's care. Ask us for details.

I applied for long-term care insurance last year and I was turned down! Does that mean I just won't be able to get this insurance at all?

Not necessarily. It depends on what condition caused the decline. Sometimes you can apply for insurance after a period of time has gone by, during which the condition has remained stable, been controlled, or disappeared. Other times, we can apply to another insurance company who will look on that same health condition more favorably. The underwriting departments are very different from one insurance company to another. That is why it's important to have a spectrum of choice and an agent who understands this.

I do not want to end up in a nursing home, so why should I buy a long-term care insurance policy?

A. Nursing homes are the most expensive and, for most people, the least desirable of all long-term care arrangements. That's why the newer, more comprehensive LTC insurance policies cover services in a variety of settings, including Nursing, Assisted Living, Alzheimer's and Hospice Facilities, in addition to care received at home and in community-based settings, such as Adult Day Care Centers. Most plans also provide for informal caregiver training, alternate plans of care and supplemental benefits designed to allow people to remain in their own homes as long as possible.

I don't need long-term care insurance - my son/daughter will take care of me!

You might want to re-think this option. Caring for the elderly takes time, effort and special knowledge to make informed choices. Also, there are many difficulties that face children who care for a parent: isolation, loss of leisure time, role reversal, physical work and financial demands. LTC insurance allows you to keep your independence and to get the professional care you need, when and where you need it. It also allows you to enjoy the love and emotional support of your son/daughter without burdening him/her with the stress of being a caregiver.

How young/old do I have to be in order to buy long-term care insurance?

Issue ages for LTC insurance usually range from 18 through 84, depending on state and carrier. You should know that despite popular misconceptions, the need for long-term care is not restricted to the elderly. Many working age adults have disabling injuries and illnesses. According to the Employee Benefit Research Institute, individuals between the ages of 18 to 64 represent 40 percent of those who currently need long-term care, and about 12 million people of all ages need help with some activities of daily living.

Last weekend my brother and I were talking about our parents who are in their late 70's. They are fine now but we are a little concerned about what could happen if one or both become frail or ill. We know they love living where they are and don't really want to move closer to either of us. What should we do?

Help them get some long-term care insurance coverage. The new policies cover geriatric care management. Having a professional care manager on site if your parents ever need care will put your mind at ease. Essentially, the care manager will become your eyes, ears and hands to help your parents get the appropriate care they need. The policy will also help pay for all types of home-based care or facilities, such as assisted living residences or nursing homes. If your parents put up obstacles to the purchase of such important coverage (e.g.: they don't want to spend their money on the premiums), you and your brother could pay the premiums for them. Just assure your parents that you want to make sure they can get good quality care where they are--at home! Believe me, if and when they ever do need care, they will surely thank you.

Okay--let's assume that I've decided I should get some long-term care insurance. How much is it going to cost me?

It depends. Your LTC insurance premium is determined by several factors. Some are already set and determined--such as your age and the state of your health. The younger and healthier you are at time of application, the lower your premium. Other factors can be adjusted and will affect how high or low your premium is--the policy daily maximum, benefit length, elimination period (deductible), inflation protection, and type of care covered. This is why a professional counseling session is so important. These factors should be set after determining what will work best for you and your unique circumstances. What works for your friend or neighbor may not be best for you.

Why should I buy long-term care insurance now? I am only 58 and in good health. Why not wait until I'm 78 and might actually need it?

First of all, we never know if and when we will ever be in need of long-term care. If we did, we could all apply a few months before our crystal ball told us we would need help. Secondly, the younger you are, the cheaper LTC insurance is. You have coverage for whatever happens, whenever it happens, at an affordable rate. Don't risk becoming uninsurable because of an accident or a developing health condition. Trying to time an insurance purchase is like trying to "time the market." Insurance is for the unpredictable in life that can cause financial disaster.

The long-term care insurance policy you've structured for me will cost $1600 annually. My neighbor has a nursing home policy from this same company and it's only costing her $700 a year. Why the big difference?

There could be several reasons for the premium difference. If your neighbor's policy was purchased several years ago, it could cover fewer types of services than the one you're looking at. We also don't know the following: 1. Your neighbor's age and health status at time of application 2. Whether or not his/her policy includes inflation protection and, if so, what type 3. The depth of coverage--daily maximum, benefit length, elimination period All of the variables listed above help determine the cost of LTC insurance. It is impossible to compare one policy to another based on cost alone. If you want a one-to-one comparison, bring a copy of your neighbor's policy in with you. Big premium differences are usually very easy to explain once you know what you are looking at.

I'm young (age 52), and I've just purchased a long-term care insurance policy. Will my premiums always stay at this level, or can the insurance company raise them? Can they cancel my policy for any reason?

Most LTC insurance policies are "guaranteed renewable." That means the insurance company cannot cancel you because of your increasing age or declining health. Only you can cancel the policy. It does not, however, guarantee the premium from here to eternity. The insurance company cannot individually raise your premium because you are older or sicker than when you applied, but it does have a limited right to raise premiums on a class basis throughout the state. In order to do this, the insurance company must apply to and get approval from the State Department of Insurance.

OK. The long-term care insurance policy you're showing me cost $2500 a year. Last week another agent showed me a policy with the same benefits from another company that was a lot cheaper. What's the deal?

You should not be choosing your LTC insurance policy based on price alone. Assuming that all benefits actually were the same between the two policies, you should also consider the following:

1. Financial rating of each carrier
2. Length of time each carrier has been writing LTC insurance policies
3. History of rate stability for each carrier
4. Toughness of each carrier's underwriting criteria
5. Ease of use at claim time

Unfortunately, there have been several instances where people have purchased what seemed to be a "good deal" from an insurance company they had never heard of before, only to find themselves exposed to major rate increases later or difficulties upon filing a claim. The premiums of experienced, highly-rated companies do not vary widely from one another. It is the state of one's health, one's marital status and age that really makes the difference in choice of one major carrier over another. Also, the actual benefits included in the policy might determine the choice of carrier rather than premium alone. For example, a single individual would not value a policy with a survivorship benefit at time of death of spouse. Whereas, a married couple might find that same benefit to be extremely valuable.

Why do I need an inflation rider on my long-term care insurance policy, since without it my policy is much less costly?

According to a News Release by the American Council of Life Insurance, "...the number of elderly Americans who need nursing home care or assistance with daily living will soon skyrocket. The costs of providing that care are expected to quadruple...the price tag could be too high for individuals, families and government programs to bear."

Selecting an inflation protection option with the purchase of LTC insurance is one of the best ways to ensure that your policy will provide an appropriate Daily Benefit Amount (DBA) when care is needed. Assuming a $150 DBA at purchase, after a 20 year period that amount will become:

$398 - with a 5% Compound Inflation protection option
$300 - with a 5% Simple Inflation protection option
$150 - with NO inflation protection (DBA stays constant over the life of the policy)

As you can see, without an inflation protection rider you may have a policy, but do you have adequate coverage?

Since I probably won't need long-term care insurance until I'm much older, shouldn't I wait to buy it so I won't have to pay for all those extra years?

LTC coverage will cost you a lot less in your 50s than in your 60s. Even though you would be paying for a decade longer, in the long run you will still be saving money.

Example: Two brothers purchase identical LTC insurance policies - one is age 55, the other age 65. The annual policy cost for the 55 year old is $910, while the cost to the 65 year old is $1630. Assuming both brothers trigger their benefits at age 85, the 55 year old will have paid $27,300 in premiums over a 30 year period, while the 65 year old will have paid $32,600 over 20 years - a savings of $5300 for the younger brother. If, however, the younger brother decided to wait ten years as did his older brother, it would cost him even more. That's because, allowing for the rise in costs over those ten years, he would have to buy a higher daily benefit amount, costing him $2445 annually for the equivalent coverage adjusted for inflation. Now, assuming he still triggers his benefits at age 85, he ends up paying a total of $48,900 in premiums over 20 years - $21,600 more than if he had purchased LTC insurance at age 55.

More importantly, waiting to purchase coverage puts you at risk for developing a health condition that could cause you to be rated by one or more carriers (increasing premiums by as much as 25-75%) and/or require you to satisfy a waiting period before applying (generally 6 months to 5 years). Waiting also puts you at risk for developing a health condition that is termed "uninsurable" by most or all carriers.

How do I know how much long-term care coverage I should buy?

Some sources recommend purchasing LTC coverage with a daily benefit amount at least as high as the average price of nursing homes where you live. But some experts believe that is usually too much coverage and that the insurance does not have to cover every penny of nursing home costs. Assisted-living facilities will cost less than nursing homes and many families can often afford to pay some portion of costs out-of-pocket if more expensive care is needed. As for benefit length, a four-year policy is considered adequate in most cases. You might want to consider a longer benefit length if you have Alzheimer's or Parkinson's Disease in your family history.

Now that I have purchased long-term care insurance, when can I start using it?

Generally, benefits start when a person needs assistance in performing at least two of the six essential activities of daily living (ADLs): bathing, dressing, eating, transferring (moving from bed to chair or chair to chair), toileting, and continence (maintaining bowel and bladder control); and the need for assistance is expected to last for at least 90 days. Or, benefits will begin when a person poses a danger to themselves because of cognitive impairment, usually due to Alzheimer's Disease or other form of senile dementia.

Please note: Most policies have an elimination period which must be satisfied before benefits are paid out by the insurance carrier. You choose the elimination period at application; it is the portion you will cover out-of-pocket. It can be as short as 0 days (first day coverage) or as long as 100 days. In some states, some policies offer 365-day or even 730-day elimination periods. For most people, the premium saved with an extremely long elimination period is not worth the risk assumed.

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N.P. Morith Inc.