In my last post I explained the basic differences between long-term care (LTC) insurance and disability insurance. For most people, LTC is associated with elderly people in nursing home care. We tend to think of adult children helping their elderly disabled parents find appropriate care. These are typical scenarios since many elderly people need a high level of care that is difficult for family members to provide. *[In case you are wondering if these policies really pay claims, see the note at the bottom]
I recently read a quote that gives a great description of long-term care insurance, “Long term care insurance provides choice and control, protects retirements and lifestyles, and allows loved ones to care about you rather than being forced to care for you. You can’t put a price on that kind of value.” — Bill Jones, President of the MedAmerica Companies. Sure, that is a plug by an insurance company, but it expresses well the main purpose of LTC insurance.
If you notice in the quote above, there is no mention of age since long-term care can be needed for all age levels, which brings me to my next point…
Non-traditional use of long-term care insurance
As I noted in my prior post, roughly 40% of those receiving care are between the ages of 18-65. Now, most people don’t buy LTCi until their mid to late 50s. What I described above pertains to the “traditional” use of long-term care insurance involving care for the elderly. So, let’s look at a non-traditional use of LTCi.
There are many business owners starting off a business and trying hard to turn a profit, however, they don’t show much income. Since disability coverage is based on adjusted gross income, many people don’t qualify for a decent benefit. There are also business owners who don’t show much income for tax purposes. This is where LTCi can serve as a type of disability insurance product since income is not an eligibility factor.
Most carriers now offer benefits that are partly paid as cash. In other words, part of the benefit goes to the insured to spend however he or she deems necessary; the other part goes to a caregiver. The money received from the insurance company could replace income. This type of insurance would be more catastrophic in nature. In my prior post, I noted that to be eligible for LTCi benefits, one must be unable to perform certain activities of daily living (ADLs). So, this type of insurance might work well for someone who mainly sits behind a desk and does not need to be mobile or work with their hands.
A lot of people like the LTCi alternative since it doesn’t stop paying benefits at age 65 and there is no income requirement. In fact, one can purchase a very high benefit amount and then scale it back at a later date. This alternative can also work in situations where a stay-at-home mom needs protection, but again, doesn’t have an income to justify a disability insurance policy.
Another non-traditional use of LTCi is what’s considered a “hybrid product” that combines life insurance with the “living benefits” of LTCi. These plans can work quite well, especially if someone has a definite need for both types of insurance.
There are many ways to protect against the loss of income or assets due to a catastrophic injury or illness. Working with an agent who understands all the new types of insurance is quite valuable.
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* Do people really receive benefits?
Long-term care insurance companies paid $6.6 billion in benefits in 2012. That’s a staggering amount, but it shows that there is a huge need for this type of insurance. The average cost of an assisted living facility in Atlanta is $2800/month. The costs are less in other areas of Georgia – the cost can be as high as $4500/month or closer to $1500/month (for lower quality facilities).
The average cost for nursing home care is $175/day for a private room and $150/day for a semi-private room.
Many people on claim choose to stay at home and have a care-giver come to them to assist with daily needs. This is especially true if someone has family members willing to help, but they need assistance and relief. Some people choose to partially insure, knowing they have a family who can be counted on to help.
Peachtree Insurance Advisors 678-236-1600 www.insuranceadv.com
