Choosing Long-Term Care Insurance
Choosing Long-Term Care Insurance Video Transcript
Good morning to everybody out there in Facebook land, Dave Reichelt here. Dave Reichelt Insurance Agency - Nationwide Insurance. I want to talk to you this morning about choosing long-term care insurance. You can visit our page Nationwideinsurancepocatello.com. There is a long-term care insurance page that will give you a lot of information. You can also call us at (208)232-DAVE (3283).
Three Types of Long-Term Care Policies
1. Basic Long-Term Care Insurance
Let's talk about it - there are three types of long-term care insurance you can choose from. First, there is the basic long-term care insurance policy. You are simply buying benefits for long-term care insurance.
Now, what does long-term care insurance really mean? 1 out of 2 Americans will need long-term care of some kind. Long-term care is being defined as not being able to perform all six activities of daily living: being able to feed yourself, bathing, getting yourself dressed, transferring yourself and being able to get to the bathroom on time (continence).
Those are the six activities of daily living. Or some type of impairment which means you have Alzheimers, dementia, or some other type of memory impairment. When you get to where you can't perform two of those daily activities you are going to need long-term care. Whether it's in your home or some nursing facility.
If you're 65 or older there is a 70% chance you will need some form of long-term care. How do you prepare for it? It's very expensive because Medicare won't cover for the most part, and if you want Medicaid to cover anything you have to basically be destitute - you may have $1,000 or less coming in per month.
You need to have something in place such as your long-term care insurance. This is the least expensive way you can get into it right now. If you're buying a monthly benefit for a certain amount of years.
A typical policy is $3,000-$4,000 per month for three years. The average person goes for three years. It's a little less to start, but the downside is the rates are not fixed. So what you may be paying $3,000-$4,000 per month can go up 20-30% at any given time over the lifetime of the policy.
It pays out on a reimbursement basis so you accrue the expense, turn in the receipts and you get reimbursed for that. But if it's less than the benefit amount you don't get to bank those benefit dollars.
Let's say I only need $2,000 of benefit care for the first month, and I had $4,000 of coverage - the other $2,000 of coverage just goes away. It's not the most inclusive of policies but is the least expensive way to get started and if you never use it, it just goes away when you pass away.
2. Choosing Life Insurance with a Long-Term Care Rider
Next, is the Life Insurance policy with a Rider. I like these, here is the reason why: let's say you buy $200,000 of coverage, and the long-term care insurance policy says it will pay out 4% death benefit per month - that's $8,000 of long-term care coverage you could have in the future for up to a little over two years (25 months).
The nice thing is if you never use it, it will be death benefit coverage in the end. The companies that write these - including Nationwide, know how much money they're going to pay out in the end. They are going to pay our $200,000 whether it is a living benefit for long-term care or it is a death benefit for somebody. The rates are fixed, and the long-term care pays out in what is called an indemnity process where once you qualify - you just get the money and then you decide what you want to do with the care. It can be paid out in any way for the rest of your life, it just depends on how you want to pay your premium.
3. Choosing a Life Insurance Policy with a Linked Long-Term Care Rider
The last one is a life insurance policy with a linked long-term care rider. This policy is still a life policy but it lowers the death benefit as low as possible so that you can have more long-term care coverage. Using that same scenario that over a lifetime in a one, five, ten year period that you pay into this policy - and let's say you pay in $100,000, you may only get $130,000 of life insurance but you're not buying it for the life insurance policy you're buying it for the long-term care rider. So that $100,000 that you pay is going to be $300,00-$400,00 of long-term care coverage over a four to six year period depending on what you pick. That policy will be paid up in no less than ten years.
Make Better Use of Your Money
This is a good way to look at things if you have money already saved for long-term care and you are able to move it. This allows you to make better use of your money for long-term care as opposed to putting it into a CD or a money market account. Choosing Life insurance with a long-term care rider is good if you're younger and you want to build an asset and have that policy over a long period of time - you'll want to have more life insurance to go along with it.
Choosing a basic Long-term Care Insurance policy is good if you're looking for the cheapest possible way to get in but you want some coverage.
Thanks for joining us for Choosing Long-Term Care Insurance video. We appreciate you!
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