Long Term Care Insurance– What you need to know

 


Having seen a lot of questions about Long Term Care Insurance in a Facebook group, I attempt putting all information in a short post. Yes, I specialized in Long Term Care insurance (LTCi) and Long Term Care annuity. I hope what I wrote here can help you have a good understanding before shopping around for it.

70% of people above 65 years old will need Long term care (LTC), which will not be paid by Medicare or any health insurance you have. With the rising cost of health care, you have to plan big for LTC expenses.

You can google and see how much LTC costs in each state, and compare, and plan for yourself.

As far as I have known, there are 4 kinds of LTC insurance:

-        Traditional LTCi – a lot of people when talking about LTCi will think about this kind-“ Use it or lose it”. The premium is the cheapest at the time you apply for it, but no guarantee to not increase. 

-        LTC rider on a permanent life insurance: you can buy a life insurance policy with LTC rider, especially when you are young. The cost of the LTC rider will not rise over the guaranteed maximum. If you die, you have death benefits for your beneficiaries. If you live long and need LTC, the policy will pay from 2 to 4% of your death benefit every month. For example, I have a $500,000 policy with LTC rider. At the age of 80, I need LTC, the policy will pay me 2% of $500,000/ month, which equals $10,000/ month, yes, in 50 months.

There are other life insurance policies with Chronic Illness rider which pay you the same way as policies with Long term care rider. However, if you are in Washington state, policies with Chronic Illness rider are not considered as Long Term care insurance, so you can't opt out Washington Long term care tax. 

-        Linked Benefit LTCi: This one is suitable for older people, from 50 to 70 years old. You don’t need a big death benefit any more, but it still has a death benefit in it. You need LTC, the policy pays. You don’t need it and die, your beneficiaries get death benefit. If you use up all the LTC benefits, the policy still save about 2% of original death benefit for you. The company may offer inflation rider so that after decades, your LTC money will catch up with the future cost. You can use HSA money to fund this kind of LTCi because it qualifies. The premium is guaranteed to stay level. You can pay ONCE, or in 5 years, 10 years or up to 65 years old.

-        LTC annuity: similar to normal annuity but it has LTC rider. This usually requires single premium, which means you can rollover some of your money from 401(k) or IRA to this annuity. “If a fixed annuity has a long-term care rider that’s designed to work with in the PPA (Pension Protection Act’s), the tax-deferred dollars used to pay for qualified LTC expenses are typically federal income tax-free”. The benefits can be paid for 4- 6 years, or for lifetime depending on the company you choose.

 


There are Indemnity plan and Reimburse plan. The first one pays you full to the percentage or the amount on the policy without asking you to collect any bills or receipts. You may want to use the money to remodel your bathroom to fit your LTC need. But with Reimburse plan, you have to collect the receipts and the company will pay you back to the maximum of the amount in the policy. Each has both advantages and disadvantages.

Same rules with life insurance, the younger you are, the lower premium you pay. The older, the higher premium, and the harder you are accepted. LTCi cost can be tax-deductible. 

Some companies require full underwriting, but others require a phone interview.

I put some websites of the companies I’m working with so that you can explore.

https://experiencecaresolutions.com/index_lead.html

https://www.globalatlantic.com/retirement-annuities/fixed-annuities/forecare

 https://nationwidefinancial.com/nationwide-retirement-institute/health-care-in-retirement/long-term-care

 


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