Private room nursing home costs average about $78,000/year (2009) but range from a low of $65,000 in Mississippi to $165,000 (more than double) in Connecticut, with New York not far behind that number.
The cost to you for a $150 daily benefit for a 3-year period at age 65 is about $3,000 per year.
I have run the numbers and found that, in general, saving/investing that premium money will only provide you with about a 1/2 year of this 3-year benefit. As stated in a previous post on LTCI, after inflation, you may find that the benefit you paid for with these premium dollars may result in still being under-insured by half.
But...interest rates, inflation and years before needing the care are all variables in that calculation and can change the results.
An Introduction
Hi. Welcome to BourGroup and my blog. Phil
Phil Bour is a CERTIFIED FINANCIAL PLANNER(tm) professional since 2004, a Magna Cum Laude college graduate and an accounting professional for over 35+ years. I love numbers, statistics and economic history.
I am also an Enrolled Agent (EA) to represent taxpayers before the Internal Revenue Service and to prepare tax returns.
"Phil"osophy: I believe that you can manage your money on your own (not necessarily through individual stock selection but through mutual funds, ETF's and other solutions) once you receive some one-time, professional guidance. Why pay annual fees when there may be little added value? For additional information, first read the "An Introduction" label at the left. Then move on to others.
Phil Bour is a CERTIFIED FINANCIAL PLANNER(tm) professional since 2004, a Magna Cum Laude college graduate and an accounting professional for over 35+ years. I love numbers, statistics and economic history.
I am also an Enrolled Agent (EA) to represent taxpayers before the Internal Revenue Service and to prepare tax returns.
"Phil"osophy: I believe that you can manage your money on your own (not necessarily through individual stock selection but through mutual funds, ETF's and other solutions) once you receive some one-time, professional guidance. Why pay annual fees when there may be little added value? For additional information, first read the "An Introduction" label at the left. Then move on to others.
Showing posts with label Insurance-LTC. Show all posts
Showing posts with label Insurance-LTC. Show all posts
Thursday, February 11, 2010
Wednesday, February 10, 2010
LTCI - Long Term Care Insurance Statistics
From the American Association for Long-Term Care Insurance (2008 LTCi Sourcebook), 8 million Americans currently own long-term care protection; however, only 180,000 individuals received claim payments. That is only 2%.
So, the Long-term Care insurance salesman will tell you that you have a 50% chance of needing long-term care but not mention the above statistic. Is it accurate? Even a stay of 2 weeks (for knee surgery rehabilitation covered possibly by your medical insurance), is included in the 1 out of 2 who will need long-term care numbers. So be careful.
When is the best time to buy Long-term Care Insurance? The longer you wait the more the risk that you will not be insurable. Age 50-59, 13.9% were declined coverage and from ages 60-69, 20-33% were declined coverage.
However, at earlier ages, you must consider that inflation protection riders based on the CPI may not keep up with actual inflated costs of long-term care. At age 49, for example, you may not need that coverage for 40 years or more. If the CPI averages 3% but long-term care costs actually increase at an average of 6-8% (as they do now), then your coverage will cover less than 50% of that future value. In other words, you are better off than having no coverage but still very under-insured. What to do?
Consider Future Buy-Up Options. The answer may not be in inflation-protection but rather in the ability to increase coverage every 3-5 years without medical underwriting.
If married, Shared Care Option, allow both spouses to share a single benefit over both lifetimes.
So, the Long-term Care insurance salesman will tell you that you have a 50% chance of needing long-term care but not mention the above statistic. Is it accurate? Even a stay of 2 weeks (for knee surgery rehabilitation covered possibly by your medical insurance), is included in the 1 out of 2 who will need long-term care numbers. So be careful.
When is the best time to buy Long-term Care Insurance? The longer you wait the more the risk that you will not be insurable. Age 50-59, 13.9% were declined coverage and from ages 60-69, 20-33% were declined coverage.
However, at earlier ages, you must consider that inflation protection riders based on the CPI may not keep up with actual inflated costs of long-term care. At age 49, for example, you may not need that coverage for 40 years or more. If the CPI averages 3% but long-term care costs actually increase at an average of 6-8% (as they do now), then your coverage will cover less than 50% of that future value. In other words, you are better off than having no coverage but still very under-insured. What to do?
Consider Future Buy-Up Options. The answer may not be in inflation-protection but rather in the ability to increase coverage every 3-5 years without medical underwriting.
If married, Shared Care Option, allow both spouses to share a single benefit over both lifetimes.
Friday, May 25, 2007
Long Term Care
The annual cost for a sample LTC policy, where the insured had a "preferred" rating, a daily benefit of $250, a 90-day wait period, an unlimited benefit period, an unlimited benefit amount, compound inflation protection of 3% and a waiver of premium, was a bit more than $6,900. That same policy would cost the couple $11,000 per year if they waited five years to buy it, or $19,200 per year if they waited 10 years, or $65,900 per year if they waited 20 years.
- What am I trying to accomplish with this type of insurance protection?
- Not being a burden to my family is one objective.
- Others include protecting assets (how much and what?); having a choice of care providers or sites of care; and staying home at all costs.
- How much money could I afford to pay toward my care, should I need it?
(It's important to factor in retirement income only and any need to also support a spouse or partner. Do not use employment income.) - How much does it cost to receive care in the retirement or family location that would be desired?
- Then how much more will I need the insurance to provide so that spouse can still live well and other estate planning goals get met?
- Add the automatic inflation protection to the LTC insurance policy (5% compounding is best for younger folks under 70).
- How much can I afford to pay in retirement for this insurance?
- Do I really want to be able to pay family to provide care
(consider being incontinent and having family help you)? - If I don't want family or friends, do I want to be able to pay anyone and not necessarily a certified home care worker or agency?
- This will answer whether a reimbursement policy (a policy that pays for the actual cost of care) or a disability-based indemnity policy (one that pays the daily or monthly maximum) is appropriate
Subscribe to:
Posts (Atom)