The Benefits of Ownership

Baby Boomers and seniors, a must read!

Today we end our series about long-term care insurance with part 3 by Brian Allred. This article takes a look at the benefits of owning such a policy and other considerations when purchasing.

Plan for life's unexpected events with long-term care insurance.
Plan for life’s unexpected events with long-term care insurance.

You’re the owner!
In addition to self-insuring or relying on Medicaid, owning a long-term care plan is the other possibility. The benefits of owning a plan include: potential tax savings, benefits are most often received income tax free.

Owning a long-term care insurance policy also adds stability and assurance during one’s retirement years. Traditional long-term care can reach valuations of hundreds of thousands of dollars.

Benefits are determined by the monthly payout over a set period. For example, a plan may pay $4,000 a month for 4 years. This policy would have total first year benefit amount of $192,000. Companies that provide these policies allow one to buy extras such as inflation protection. Therefore, a policy that starts at $192,000 will grow at a guaranteed interest rate over time, thus the monthly benefits will also increase. This way the insurance policy will keep or outpace inflation.

Common inflation protection rates are 3% or 5%, although rates can go as low as 1%. Experienced long-term care agents can fine tune the numbers to help maximize a person’s budget.

Keep in mind, this is most often a plan for a problem that will occur many years in the future. So, owning an insurance policy that increases over time is a good thing.

Mitigating Circumstances
Purchasing a long-term care plan is like purchasing life insurance. There are minimum standards of health to qualify for the policy. Also, age and gender are part of the evaluation process. In addition, each state has different regulations. These differences in turn influence the insurance companies to offer different benefits for different states.

Regarding minimum health standards, insurance companies vary. Some companies will accept applicants with type I or II diabetes. Their concern is how the disease is managed. Other conditions such as cholesterol and even cancer are acceptable under certain circumstances. Diagnosis date, treatment and severity are all part of the evaluation process. When speaking with a long-term care agent, be prepared to have medications on hand as well as important dates such as diagnosis date and last visit to your health care provider. Other factors are height and weight.

There are health conditions that are roadblocks to coverage. If an applicant has one of these in their history they may need to look at an alternative to a traditional plan.

Alternatives to traditional plans
The insurance industry has seen an increase of long-term care claims. In response alternatives to traditional long-term care plans have been introduced. For example, a home health care plan can be purchased without regard to health history. If a person is not currently receiving care, they are eligible to purchase this plan.

Another alternative to traditional plans are annuities with long-term care riders. These are helpful because if an owner of the annuity is diagnosed as needing care they may be able to receive double the income during the months they need care.

One additional alternative plan would be single-premium life insurance. This is a type of life insurance one can purchase with single payment to the insurance company. The benefit is that in the event of one needing care, they will be eligible to receive money to pay for care that exceeds their original deposit.

Long-term care planning can be a challenge. It doesn’t have to be impossible. Having the determination to get started is all that is required. Finding a long-term care insurance specialist is the first place I recommend starting. He or she can guide you to find the best plan for your budget.

Brian Allred, Long-term Care Insurance Specialist
CA Lic: 0E15853
(951) 901-0866

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