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Many people are unwilling to purchase long-term care insurance (LTCI) until much later in life, in their 80s rather than in their 50s, say, but many recent articles have been showing up in everything from senior care trade publications to small local dailies, which actually touch on the subject of the LTCI industry trying to welcome the burgeoning senior baby boomer market. LTCI is an idea many do not want to entertain, and yet aging and long-term care always will be an issue. Some naysayers speculate that it’s obviously in the insurance companies’ favor to have these premium payments rolling in. But to them we would like to point out that even with that being salient, LTCI, although it is possible to be in wolf’s clothing, is still a sheep, because the consumer will pay less if insurance is purchased when they are still young and (hopefully) healthy. Looking into Your LTCI Options? In due time, a LTCI recipient actually pays less, not just incrementally, but as a whole, because the premium is not only based on the age at which you buy, it is typically locked in from the beginning. Here’s an example from an upcoming article by Gilbert Guides

CEO, Jill Gilbert, in Active over 50 magazine:  If a healthy 55-year-old woman purchases an LTCI policy at about $1,500 a year, by the time she is 85, she will have only paid $45,000 for thirty years of coverage. But for that same policy, a 65-year-old woman pays around $2,800 annually, which means that she pays $56,000 for twenty years of coverage;a marked increase. Waiting to buy an identical policy at 75 always increases the annual cost to about $7,500; this means that the oldest policyholder in this comparison ends up paying $75,000 for only ten years of coverage;a whopping 400% increase from the 55-year-old woman! Find out how long-term care insurance can help you? Get a free long-term care insurance consultation and quote.

More and more companies are beginning to offer long-term care insurance (LTCI) to their employees as part of an overall health care benefits package. And since buying group medical insurance is usually a way to get lower insurance rates, most people automatically assume that the same is true with LTCI policies. But in most cases, individual LTCI policies will be able to offer not only lower premiums, but it can also give better benefits if they are examined in a true “apples to apples”  comparison. Group LTCI can be a good answer for those who have severe health problems, as they may be able to qualify under the “simplified”  underwriting procedures. The same lenient qualifications also drive up the cost of coverage for everyone else in the group.

This is one reason why individual LTCI policies actually cost less for relatively healthy applicants, the underwriting procedures in use effectively screen out most of those costly severe health cases. One of the ways that group LTCI companies can mask or hide the increased cost of their policies is by not including an automatic inflation benefit as part of the premium. Sometimes they tell you that they are giving a 5% compound inflation protection, but they do it as something called a “Future Purchase Option.”  This actually means that they will come again every three years or so to make an offer based on an additional 5% compound increase in benefits. This is the least expensive way to buy LTCI initially because inflation protection is not built into the premium. The problem is that it is the most expensive way to buy LTCI over the life of the policy because you are buying additional protection every three years at a later age. Moreover, you are paying for that additional protection at that later age instead of the age when you originally purchased the policy. So these kind of policies often wind up costing the policyholder twice as much or more over the life of the policy, as if they have just brought the automatic inflation protection built into the policy then. Another method that group policies use to lower premiums by providing less coverage is reducing the home care benefit to 50 to 75% of the daily benefit.

This may indeed lower costs, but it is not helping policyholders accomplish what they usually want most: to stay at homecare and remain as independent as possible for as long as they can. Of course, some group policies can be a very good value, but it always pays to compare them to individual policies using identical benefit features to make the comparison fair for long term care.

When Should You Consider Buying Long-Term Care Insurance?

The only short answer to this question is the month before you need to make a claim  But since none of us have a crystal ball to tell us when we will be having a stroke or heart attack, or be diagnosed with a debilitating disease such as multiple sclerosis, Parkinson’s or Alzheimer’s, we simply can’t rely on waiting till the last minute to buy long-term care insurance. The truth is that anyone, at any age, can have an unexpected accident or change in their health that they could not possibly have foreseen that will require long-term care. A couple of well-known examples of such a situation are Christopher Reeve and Michael J. Fox.

Unfortunately, many people think of long term care insurance as protection that is mainly for older folks. But that is simply not the case. In fact, almost 40% of those receiving long term care are younger than 65 years of age! This surprising information testifies the undpredictability of such a need arising at almost any age.So, I suggest that the best age to purchase LTCI is at the earliest age that you:

1. Can comfortably afford the premium.

2. Have enough income and/or assets to protect that it justifies the cost of the policy.

Another sound reason for getting long-term care insurance earlier in life is that the premiums are lesser and you will most likely easily qualify for coverage, perhaps even at a preferred rate that will save you considerable amounts of money throughout the life of the policy. Unfortunately, as we age, most people stand a higher risk of developing health conditions that could cause them to become uninsurable at some point, or at least substantially drive up the cost of a good long-term care insurance policy. My recommendation is to avoid these problems by investing in LTCI at a relatively early age if you can. And since the cost of long-term care is not covered by medical health insurance, it only makes sense to protect your assets against one of the most devastating threats to your personal finances. Then, in most cases, the earlier you get coverage for long-term care, the better.

One rule that I always adhere is that I don’t discuss politics and religion unless I am with my close friends and relatives, it’s just too easy to cross the line from thought-provoking to offensive, most especially for someone who is as opinionated and outspoken as I am. After reading a recent article on President Bush’s 2.9 trillion spending plan for 2008, however, I feel I have no choice but to break my rule. President Bush recently went before Congress, controlled by the Democratic Party for the first time in his presidency, and proposed a 2.9 trillion budget that will entirely cut down 70 billion in funding from Medicare and Medicaid over the next 5 years, while increasing military spending and without affecting first-term tax cuts. While the proposed time frame is in line with Democratic goals, there seems to be some dissonance in terms of federal priorities.  If you are a higher-income beneficiary, you could expect to pay much higher long term care insurance premiums and more for drug coverage.

One more component of the plan, according to the New York Times: ” freezing Medicare payments to home health care agencies and reducing inflation allowance paid to hospitals, nursing homes and other providers. ” Considering Congress, negative response to the president’s proposal from last year, which suggested smaller Medicare reductions, it’s unlikely this plan will be accepted as is. Whether you bat for the left or the right, though, there’s no denying that the fast increase in the retirement-age population puts a lot of pressure on the federal budget. Remember that entitlement for the older Americans come from income taxes on people of working age. It takes five working Americans to support one senior citizen’s entitlements. How would, or should, the government respond if Social Security trustees have projected accurately, and by 2030 there are only three workers for every adult older than 65?

It is entirely possible for Medicare, Medicaid and Social Security to consume federal spending. Are there options that don’t involve spending cuts or tax increases? How and where should we conserve to avoid a fiscal crisis without stripping Americans of the care to which they’re entitled?

Most individuals are aware of the gaps within the original Medicare plan. For one, there’s no “stop loss” feature. Other long term care insurance policies will pay 100 percent towards certain medical services after you have meet your deductible, for example, you might have to pay $1,500 per year before your benefits will kick in. If you have Original Medicare and need hospital care or must enter a  nursing home, this applies to you. A lot of people buy Medicare Supplemental (Medigap) Insurance policies to fill in the gaps within their existing coverage, which might include co-payments or deductibles. Medicare Advantage Plans usually cover all the same services that original Medicare covers, and potentially some it doesn’t.

These plans are usually offered in some parts of the country through private insurance companies, but are still part of the Medicare program. If you’d like to switch to a Medicare Advantage Plan, now’s the perfect time. Open enrollment for Medicare Advantage extends from January 1st through March 31st. You are eligible for a Medicare Advantage Plan if you currently have Medicare Part A or Part B. You will, however, need to see doctors and use hospitals within the plan, much like you would with an HMO. If you’d like to switch plans, keep in mind that you cannot drop Medicare prescription drug coverage. If your existing plan has prescription drug coverage, then your new one needs to have it as well. For more information on the plans available in your area, visit Medicare’s web site or call 1-800-633-4227.

Your new plan should be effective on the first of the month after  your request is received. Still not sure what all the Medicare plans cover? Gilbert Guide lists all of the major types of insurance as well as what they cover. For a detailed explanation, check out Gilbert Guide’s Medicare Explained or Senior Care Reimbursement Overview, which will show you where each type of insurance pays benefits.

In a survey conducted by the AARP a few days ago, the findings showed that there is confusion between what most individuals think about long-term care costs and the actual cost of care itself. In fact, after surveying 1,456 people over the age of 45, only one in 12 came within 20% of estimating long-term care costs accurately. Most felt that only $500–1000 a month would do the trick nicely. This is something of an unrealistic outlook when I work with old folks and help them out in making a plan for their long term care needs. Quite often, they are shocked when they see the premium cost for a long-term care policy, especially if they happen to be in their sixties or seventies.

But there are two very important reasons that LTCI costs as much as it does. One is that the costs of care in this industry are rising more than 5% annually on the average, and have done so consistently for so many years now. For the most part, average inflationary costs for the rest of the economy averages around 2–3% a year. However, that is usually not the case with home health care, especially long-term care. To put those figures into perspective, a 5% inflationary measure means costs double every fifteen years or so. So let’s say that if facility costs are $150 a day in your area nowadays, in fifteen years they will most likely be around $300 per day. And in fifteen more years, that figure balloons to $600 a day. The questions that each person must ask themselves about preparing for that kind of expense are whether they have the funds available now to pay for their care, and whether they will have the additional funds in the future to make up for the increases caused by inflation? Will those funds be liquid enough to be accessed quickly and without major financial loss to necessary retirement income?

The second reason that LTCI costs as much as it does is that it is one of the most commonly used forms of assisted care insurance that you can buy. A Metlife Mature Market study was made in 2000 revealed that out of 1,000 people age 65 and older, only five will ever lose their home to a fire. Only 70 will experience an auto accident that requires them to file a claim on their auto insurance. But in the same age group, 600 will require some form of long-term care. It saddens me when I see so many people working so hard to put away money for their retirement years, and yet not understand the single greatest risk to their retirement income that exists. I encourage everyone to take a hard, realistic look at the rising costs of long-term care and start as early as possible to prepare to meet the financial challenges ahead.

Becoming familiar with the foundational features and options of a good long-term care insurance (LTCI) policy requires taking the time to educate yourself before making your final decision. This will help ensure that you get the policy that will best fit your particular needs. The next step is to find the insurance provider that will suit you best. Since there are a number of LTCI carriers to choose from, here are a few suggestions for  selecting a company that is worthy of your trust in the many years and also offers a quality product.

Among numerous companies that offer LTCI, there are a few that have an outstanding reputation. What I mean is that these companies have already distinguished themselves over a long period of time as financially solid, rate-stable carriers with an excellent customer service record. Unfortunately, we see so many stories in the media these days of other LTCI companies whose record in these areas is being seriously challenged. It’s been reported that some have appeared to excessively deny claims for the sole purpose of making a profit. Others have had to request hefty premium increases due to a much higher number of claims than they had projected. While these stories may hold some truth,  what we don’t hear is the good stuff: LTCI companies that really adhere to their claims of the  customer being #1.

In the June 18, 2007 issue of the Newsweek magazine recommended the following four companies as being major carriers that can be worthy of your consideration: Genworth, John Hancock,  MetLife, and Allianz Life. Of course, that does not mean that there aren’t other fine companies represented in the LTCI  field, but the four carriers identified by Newsweek are among the oldest and financially strongest in the industry. They are also the ones with extremely favorable records of customer satisfaction.

Genworth, John Hancock, MetLife and Allianz Life are all fine choices if you are in excellent health. But if you have health issues which are not serious enough to render you uninsurable, but will most likely disqualify you for ” preferred ” rates, then the company you have selected can have a significant impact on your premium. The reason for this is that each company has its own underwriting procedures that it uses for rating policyholders. These procedures can be different from one company to the next. For instance, one company will not issue a ” preferred ” rating  to anyone who uses even a single blood pressure medication, while others will allow the use of up to four of these  medications and still award the highest rate classification for long term care

Once you have more serious health conditions, the difference in the way individual carriers treat those issues can even be more serious. In other words, some health conditions that one carrier may decide to accept may be cause for rejection  by another provider. Here is where having the assistance of a knowledgeable, experienced agent who can choose  from several top companies in the LTCI field, can be a real asset in finding the company that is not only  trustworthy and reliable, but also best fits your particular needs and home health care history.

If affordability is one of the concerns keeping you from investing in a LTCI policy, consider the tax benefits that go along with LTCI. It would indeed be wonderful if the Congress has allowed all LTCI policyholders to deduct the full premium on their taxes. However, our lawmakers have not yet enacted such legislation. As is often the case, they are waiting until the system is almost broke before they will do anything like that. And with the approaching flood of baby boomers quickly becoming seniors, it doesn’t take much to realize that we have a train heading off the tracks at full speed. However, despite the impending train wreck, there are some tax benefits that have been approved thus far. If you are considering the purchase of long term care insurance you should know about them.

Nowadays, most of the tax deduction benefits go to the employers and the self-employed. If you don’t fall into that category, the Congress will require you to itemize your LTCI policy premiums along with all other health expenses during the year. Anything over 7.5% of your adjusted gross income can be used as a deduction. If you have a health savings account (also known as an HSA medical plan), however, you may be able to deduct even more if you are a retired person or an employee.  If you are a sole proprietor, a partner, or own an S corporation or LLC, even if it is just a small business, you can eliminate that 7.5% threshold and instead deduct premiums up to a certain maximum that increases with age. The schedule for tax that lists this table for qualified deductions is available for download on my Web site. If you would like to learn more about the specific deductions that may be available, you can find it at http://www.duanelipham.com/tax_summary.pdf.

If you own a C corporation, you are fortunate enough to be able to declare the entire premium as tax deductible. The amount of money you will save depends to a large degree on your tax bracket. Many self-employed folks in the 30% tax bracket who use the tax schedule mentioned above may be able to save 20% or more of their long term care insurance premiums in tax benefits. For those who can deduct the entire premium, even greater savings can be realized. Of course, it is wise to consult your accountant or tax attorney to be sure of the tax benefits that may apply to you specifically. The tax benefits that surround LTCI can save you money in the long run, and we all know what the home health care benefits can save: in some cases, your life.