Should You Consider Investing in Long Term Care Insurance?
A Q&A with Barry Kohler, SVP and Director of Trust and Wealth Management at Androscoggin Trust and Wealth Management
Q: What’s the simple definition of long term care insurance?
This is insurance designed to help meet expenses once a person reaches a “medical end-point” – that is, makes as complete a recovery as is medically likely. The better policies provide benefits whether the insured person is at home or in a facility. It is NOT insurance to pay for medical bills related to a hospital stay or treatments in a doctor’s office. It helps meet expenses NOT covered by Medicare.
As the name suggests, the coverage is intended for longer period of time. To make a policy more affordable, most clients will select an “Elimination Period” – the number of days you have to wait before the benefits (payments) begin. The most common EP we see is 90 days, but the range can be from 0 days to 360.
Q: Is long term care insurance expensive?
The number of variables around the policy design (primarily the daily or monthly benefit amount and the length of time the benefit will be paid) plus your age and health at time of application make it virtually impossible to provide a rule of thumb number.
How to think about Long Term Care Insurance
The best way to think about long term care insurance is the same as the way you think about homeowners insurance. Although you may not need it, if you do, the potential cost of long-term care can be staggering – easily in excess of $500,000. Compared to that, the premium cost often seems reasonable. It is also possible to run a “break-even” analysis. That is, we can calculate if you pay the premiums for X years and end up using the benefits for Y months/years, when you will break even. In other words, we can calculate when the cost of care will exceed the cost of the premiums you have paid. [Premiums stop when the benefits commence.]
Younger and healthier people will pay less for the coverage in general and the cost will also be less with a shorter coverage period and lower benefit level.
All of this assumes, however, that the premium remains level. And while a long term care insurance carrier cannot raise rates for one per person, they can seek state approval to raise rates for an entire class of policy-holders. This has been happening, and the increases have been substantial. While there are many reasons for this, the result is that for many people, it is difficult to have confidence in what the future cost of long term care insurance premiums will be.
Q: How can AndroscogginTrust help me with long-term care insurance?
We look at long term care insurance in the context of your overall financial picture and plan. Not every client is going to need or want long term care insurance. It most definitely is NOT the right decision for everyone. But for those who do, we can look at all the options, discuss pros and cons, and then actually place the policy – one that works in the context of that client’s overall plan.
We rarely see clients make the best decision without looking at the big picture. But often, the conversation starts around a particular issue or question.
For more information on long term care insurance, visit www.androscoggintrust.com, email Barry at bkohler@androscogginbank.com or call 1-800-927-3344.
Planning services may be offered AndroscogginTrust, a division of Androscoggin Bank or through Androscoggin Financial/ INVEST Financial Corporation, member FINRA, SIPC. INVEST is not affiliated with Androscoggin Bank or AndroscogginTrust.
Trust Services are offered through AndroscogginTrust. Investment Management Services may be offered through AndroscogginTrust and other investment or insurance products may be offered through Androscoggin Financial Services/ INVEST Financial Corporation (a registered Broker Dealer and Registered Investment Advisor, and its affiliated insurance agencies).
INVESTMENT AND INSURANCE VEHICLES AND PRODUCTS ARE NOT BANK DEPOSITS, ARE NOT FDIC INSURED; AND ARE NOT OBLIGATIONS OF, OR GUARANTEED BY, ANDROSCOGGIN BANK OR ANY AFFILIATE; AND INVOLVE INVESTMENT RISKS THAT MAY RESULT IN THE POSSIBLE LOSS OF PRINCIPAL.