Questions Received During Webinar: Planning for Long-Term Care March 22, 2017 Answered by Mark Kirby, LTCR mkirby@ltcr.com 1-888-532-8232 1. Is there an age limit to buying a Long Term Care insurance policy? Yes, the age limit is generally between age 40 and 79, but younger (18) with one carrier. 2. If only one of you is an alumnus/a, can both spouses still apply together and get the discount? Yes, both spouses will qualify for the association discount and are encouraged to apply together because there is an even more significant spousal discount as well. 3. If you have glaucoma, are you insurable? Yes, as long as it is being treated successfully. 4. Can you provide the name of the insurance company or companies underwriting this program? For traditional coverage we can offer Mutual of Omaha, TransAmerica and Genworth. For hybrid plans we offer OneAmerica, Lincoln Benefit and Nationwide. 5. Can someone with chronic but common conditions like high cholesterol or high blood pressure buy Long-Term Care insurance? These two conditions are insurable. The best way to determine if a specific condition or combination of conditions is insurable is to have a conversation with Mr. Kirby who will be able to give you honest answers within minutes. 6. Is there a history of any of the insurance companies going out of business? If that happens, what then? There have been only a very few LTC insurers who have gone into receivership. When this happens, the State Guarantee Association in each state that the insolvent Page 1 of 7
company has done business in will divide the active clients policies up amongst all remaining companies who are currently still doing business in that state. This is very rare. More commonly, a company that decides to get out of the business will simply stop offering new policies, but will remain obligated to service all polices already sold. 7. In reference to the Elimination Period... are insurance payments made retroactively? To the beginning of the period or do they begin at the end of the elimination period? Think of the elimination period as a deductible. You will be required to provide your own care for the first 90 calendar days that you are eligible to receive benefits. There will be no retroactive payback for this period of care. But also keep in mind that you will have a predetermined lifetime maximum benefit that will be available until it is all spent. Because of this, the 90 day elimination period will extend the benefit period by a number of days because your total benefit won t be reduced by the 90 day expense. 8. I'm hearing from my financial advisor about a "newer" product that incorporates both LTC as well as Life Insurance. Do you have any observations/cautions/recommendations on such a product? We offer three hybrid plans. One of them addresses all of the objections we hear about traditional coverage. It is an excellent product. The drawback is the cost. 9. Can premiums be paid from my Health Savings Account? Yes 10. What if you ask your LTC insurance company if they are partnership participating and they don't know? What is the correct question to ask them? Maybe I worded it wrong. But they acted as though they never heard of it, and this is a major or wellknown insurance provider. Anyone who offers long term care insurance should know the answer to this question. I am required to take many dozens of hours of continuing education every year to stay licensed, and you cannot escape the partnership aspect of this coverage while taking these classes. So, the person you talked to is either incompetent, or they are hiding something from you. Page 2 of 7
11. What happens to your Long-Term Care insurance policy if you move from one state to another? All LTC insurance policies are portable. Your coverage will move with you. This is universal throughout the industry. The partnership aspect of the program may not be portable however. Most states reciprocate with each other regarding partnership, while only California doesn t. But some states offer different versions not recognized by other states, and some states offer no partnership, and won t honor other states programs. But as the years go by, more states will come into line in this regard. 12. You listed the process and/or requirements for qualifying for claims. Is it really only a doctor s note or does the insurance company have a process similar to the underwriting process? As mandated by the NAIC, all companies must go by your doctor s recommendation. They do, however, from time to time, send a nurse to verify that the patient is still alive and incapacitated, and that the claim should continue. 13. What are the names of some of the insurance companies that offer the best policies? (See answer to Question 4 above) 14. I heard that many people are not eligible for coverage because of so many different medical issues. Exactly how healthy does one need to be to qualify for this insurance? This is a common question and is best answered on an individual basis with Mark. There are too many maladies, diseases and health conditions to go into any detail at all. But Mark will have an answer for your situation within minutes of your asking the question. 15. Since one reason for coverage is to preserve your personal assets what is the typical net worth for someone acquiring this type of insurance? Typically folks who buy coverage have an estate valued at $200,000 or more. It has been argued that millionaires don t need this coverage because they can afford the expense. My response is that if this is true, then millionaires need no insurance of any kind whatsoever, because this is (unfortunately) the most likely large insurance claim anyone will ever make on any insurance policy they own. Page 3 of 7
16. You said the typical policy covers 50 months $6,000/mo. Doesn't this seem too short-term, especially in cases of memory loss? The answer is yes, you are correct. If you end up in a protracted long term care situation, you will run out of benefits. The unfortunate thing about this coverage is that the cost is so prohibitive, most folks cannot afford huge policies. But keep in mind that 50 months of benefits will cover over 90% of everyone who makes a claim. And additionally, if we assume you will spend every dollar every month, then the benefits would only last 50 months. But for memory care patients, typically the first months and years are managed by family members at home for minimal cost. This will extend the time that the policy will pay well beyond fifty months. This is why the benefits should be expressed, and thought of, in terms of a dollar amount rather than a timeframe. But if this is not what you are looking for, we can offer a hybrid plan that pays unlimited benefits for life. 17. I understand some life insurance offers LTC as a rider. Are these good deals? This concept is the hybrid plans that have been mentioned. To give a better understanding, please read the following: There are at least seven advantages to buying long term care insurance with a hybrid plan: 1. The premiums are guaranteed to never increase. This is in contrast to traditional LTC coverage which may increase, and I have personally seen most of my clients end up with unforeseen and sometimes unaffordable rate increases on their traditional policies. 2. You have the option to pay it all up at once, pay for a limited number of years, or pay every year for life. Traditional LTCI only allows the lifetime pay option. 3. This is the only unlimited lifetime coverage available in the marketplace. All traditional LTC policies now have policy caps that limit how much they will pay out. If you end up in a protracted LTC situation, you could run out of benefits, and many do. 4. The underwriting is more relaxed. I have had many seemingly healthy individuals declined or rated for innocuous reasons that have little bearing on whether they may end up in a care situation. This can be extremely Page 4 of 7
frustrating for everyone involved. OneAmerica understands this and is much easier to deal with. 5. The elimination period is shorter. Almost all traditional policies include a 90 day waiting period for all levels of care. The hybrid plans include a 30 day waiting period for home care or 60 days for facility coverage. At the time of a claim, this will save you thousands of dollars. 6. You can use qualified money to buy your hybrid plan. Once you ve reached age 59 ½ you will not pay a penalty for doing so. You will receive a 1099 each year for twenty years (in 5% increments each year) to defray the tax event. 7. When you buy a hybrid plan, you are guaranteed to get either the death benefit or the long term care benefit returned to you or your estate. With the traditional plans, if you never need care there is no return of your premiums unless you buy a very expensive rider. But there are at least four disadvantages: 1. You will lose time value of money. With interest rates as low as they are currently, this is a concern, but not a huge concern when compared with the high annual (forever) premiums of the traditional coverage. 2. You will not receive inflation protection on the first 25 months of benefits. The current cost of care, as you know is already higher than the monthly benefit of this program. So, you may have a large overpayment to make during this period. But in a long, protracted stay in long term care, this would be a small concern. This program would pay out much better than the traditional coverage (for similar premiums) if you needed care for five or more years. And these protracted lengths of stays in long term care are becoming more common as the population ages. 3. The cost of a hybrid is higher. But this is offset by a guarantee that you will receive either a death benefit or a long term care benefit that could be much larger. Over all, you will likely end up paying the insurer fewer dollars, because of this guarantee, and your leverage will be much greater with the hybrid over the traditional coverage. 4. There are no state partnership agreements for hybrid plans. But if you have unlimited lifetime coverage and never run out of benefits, you will never need to access Medicaid or Medicaid planning. Page 5 of 7
For the money, the hybrid plan gives you more value. But also, most of what we sell is still the traditional coverage. The hybrids are gaining ground, however. 18. Do premiums go up as you age? For example, if you take out LTC insurance when you are age 50 at $400/month, does that premium go up as you get older, like when you turn 60? Premiums will not incrementally increase. They will only increase in the event that the insurer loses money in your state, and then your state insurance commissioner determines how much of an increase you will get. This doesn t happen often, but it can happen. 19. Can you hold more than one LTC policy at a time? For example, what if you take one out from Company X when you're 50, can you take out another to add to that from another company? You may own more than one policy. Some companies have restrictions however. Some may tell you that they will not offer you more than $XXX combined between all policies. But other companies don t have this restriction. When you have more than one policy in force at the time of a claim, the companies involved will pay the total benefit based upon the age of the policy. The oldest policies pay first, and then the next oldest etc. The combined policies won t double pay a benefit for the same expense. 20. Why is the policy just for 48 months at $6,000/mo.? This is a typical benefit level. You may choose longer if you d like. The premiums on this coverage will drive your decision regarding how much to insure for. 21. Is there a maximum age limit as to when you can buy long term care? Yes, you must buy your coverage before your 80th birthday and there is no grace period on this. Once you ve bought your coverage it is guaranteed renewable for life. 22. Can you take out another LTC policy when you're age 60 to add to the first one you took out at age 50? Yes, see above. Page 6 of 7
23. Why is the policy just for 48 months paying at $6,000/mo. = $300k? What about after 48 months? There will be no additional benefits if your policy runs out. However, most states have a partnership program that allows you to protect a portion of your assets from Medicaid spend down. 29. Can you get more than one policy if you think the first one isn't going to be enough? (providing you would still qualify health-wise) Yes, see above. Page 7 of 7