Twenty years ago, Long-Term Care (LTC) costs were projected to reach $200 per day – or more than $70,000 per year.....and those projections were fairly accurate.  For most Americans, expenses like this would have a significant financial impact on their financial planning, but unfortunately, too few advisors took the necessary steps to address Healthcare In Retirement and LTC.  For those who were proactive, it may be time for a review, as older plans may be experiencing significant rate increases, have unanticipated flaws, or were implemented by insurance carriers with deteriorating financial positions or ratings.

Rate Increase (Again!).....

There are very few permanent plans in life, and a LTC Plan is no exception.  Insurance carriers continue to increase rates on existing blocks of  LTC insurance policies, so you and your clients have decisions to make.....especially if they're getting a 2nd, 3rd or 4th rate increase notice and their health will allow them to consider a solution with guaranteed premiums. 

Let's consider a scenario for Sally Saver, age 70, whose LTC insurance policy, issued 13 years ago, is experiencing a 3rd rate increase.  The most recent 18% premium increase will take her $3,500 annual premium to $4,130.   As a prudent measure, we help determine the client's absolute "premium tolerance" for future rate increases and come up with a premium amount where Sally would say, "I quit!!" and allow the policy to lapse and/or accept a non-forfeiture benefit. 

Two additional and similar rate increases would make the premium nearly $6,000 per year.....and that's Sally's premium tolerance.  With that maximum premium and accounting for her good health, we extrapolate that amount over Sally's life expectancy and come up with more than $125,000 and discuss repositioning existing assets to implement an Asset-Based LTC Plan.  It may not have all the bells and whistles of the existing plans, but there has to be a recognition that she will likely reach the point where having this plan is better than having no plan.

Buyer Beware.....

Another reason to consider reviewing a LTC Plan is that many consumers with LTC plans assume it is a "comprehensive" plan; however, far too often, those plans present some nasty surprises upon review.  To understand what we mean, think of a LTC plan like a three-legged stool....  

Leg #1 - Cover Informal or Home Health Care...

Leg #2 - Cover Assisted Living...

Leg #3 - Cover Nursing Home care...  

While there are other ways to receive care, these are three of the essential "legs" of a comprehensive LTC plan.  In terms of a three-legged stool, if one of the legs is broken, the stool falls over or becomes unstable.....and this can now be put into context with a review we recently completed for an advisor.  

The advisor's client has an existing LTC plan with a $200/day benefit, but after doing a policy review, she was surprised to learn the actual level of benefits for various types of care looked like this:

• Home Health Care: Only 25% of daily benefit would be paid!

• Assisted Living:  Only 50% of daily benefit would be paid!

• Nursing Home Care:  100% of the benefit would be paid...

Both the advisor and the client thought the existing LTC plan would be sufficient.  In reality, the current plan is like many older LTC plans that offer varying levels of benefits for different levels of care and won't necessarily provide the expected $200/day benefit without a Nursing Home confinement.  Making matters worse, today, it’s quite common to find the cost of Home Health Care and Assisted Living catching up to the cost of care in some Nursing Home settings.  

This client wants to stay in their home as long as possible, or "age in place" should LTC be needed, and quickly realized 25% of her $200 per day plan benefit - for Home Health Care - or just $50 per day, would be far from adequate to meet her needs. Since the client was healthy and had the ability to act on our recommendations, we were able to make improvements to her LTC plan accordingly.  

Completing a review for clients before plan benefits are needed may better position them to handle LTC expenses in the future and ensure the planning you're doing truly achieves the intended objectives.....

Please complete the "Long-Term Care Plan Review Worksheet" below so we can provide an analysis and potential options or ways to upgrade the plan.

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