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Three Kinds of People face Incapacity-Only One Kind Might Face Financial Catastrophe or Disruption

| January 07, 2018

Three Kinds of People

  1. Can't afford it.

  2. Don't need it. 

  3. Possible Financial Catastrophe

If you already have been through a Fiduciary Planning Process, (  ..  ..) you (hopefully) will already know into which of the 3 groups above you fall.  If you happen to be communicating directly with a "financial salesperson," ( ...  ... ) it might be possible that the Fiduciary Analysis "step" has not yet occurred.  Then that person actually doesn't know enough about you to know into which of the 3 groups you fall.

LTCi - Long Term Care insurance - might be -- probably is - one of the most complex things to deal with.  To actually buy LTCi, you might ... probably will ... have to go through both Financial Underwriting and Medical Underwriting.  Confidential but intrusive.  The carrier can decline you. (You would get back any deposit.)

Put simply, LTCi is just not for everyone.  It is critical for some.  Nice to have for others. And unaffordable for still others. Might be a good idea to figure out which category you fall into before you dive into the minutiae ... a lot of moving parts ... of LTCi!

Perhaps with some exceptions I don't understand ...

We are not a Third World Country.  You will get care.  The question is ... Who pays?

  1. If you have no money, the answer is ... Medicaid.
  2. If you do have money, the answer is ... You do ... not Medicare ... except for maybe small amounts... at most.

Long-Term Care insurance  (LTCi) might help avoid financial catastrophe in certain situations for some people.  
But care for incapacity is complex - imperfect - and a moving target - with or without insurance 

The information provided below was accurate at the time it was provided.  But this information is changing all the time.  Both individual states and the Federal Government get involved in this topic, primarily due to Medicaid.  Individual carriers change their policy "forms" along with the various moving parts of their policies ... and along with their pricing.  Once an LTCi contract is ... underwritten  ... an offer is made ...  the client accepts the offer / pays the first premium ... the policy is issued ... and the Free-Look period, if any, ends ... at that point the carrier is bound by the contract.  Nothing in the information below is a contract or an offer of insurance, which can only be made by a carrier and very often requires both medical underwriting and financial underwriting. Sorry for the quasi- legalese! 

Also ... in my real world experience, people hear the word "insurance" and think the word "guarantee."  But ... some LTCi contracts have guaranteed pricing.  Others have pricing that can change after you own the policy ... true ... but ... yikes! 

Long-Term Care insurance - LTCi - Disadvantages

  1. Traditional: You might be out-of-pocket the premium and may never use it. Your Net Worth might go down at least by the cost of the premium.

  2. Traditional: Your premiums might not be guaranteed and so might go up after the policy is issued. Corollary, or your benefits might be reduced for paying identical premium (sometimes that might be a choice with some carriers.)

  3. Traditional & "Hybrid:" There is very frequently a waiting period before you will receive any LTCi benefit payments. (e.g. 90 days - can vary by policy and carrier.)

  4. Traditional & Hybrid: You might have a potential "opportunity loss" of potentially not capturing investment gains on premium dollars that could have otherwise been invested.

  5. Traditional & Hybrid: The insurance benefit probably will not cover 100% of your costs of care.

  6. Traditional & Hybrid: (one carrier might be an exception) Lifetime coverage is rare.  So you could exhaust your benefits and still have to pay for care yourself (or family.)

  7. Traditional & Hybrid (one exception I'm aware of) Benefit is "reimbursement," not "indemnity."  So you need to keep track of your costs and have them confirmed.

  8. Traditional & Hybrid: You might need a Plan of Care established between the carrier and the person needing care and perhaps a TPA - Third Party Administrator

  9. Traditional & Hybrid: To typically qualify medically for benefits, you must be unable to perform "Two of Six" Activities of Daily Living (ADLs) without help from another person. (Or dementia might qualify by itself.) (Many people have varying kinds of physical / health challenges but they can actually perform 5 of 6 - i.e. they are unable to do just one without help.  Won't qualify typically.)

  10. Traditional & Hybrid: Medical and Financial Underwriting. Confidential.  But intrusive. You can be declined.

  11. Hybrid: Insurance "multiplier" might not be that large - e.g. maybe 2X - or 3X - depending on age and health when policy is issued

Long-Term Care insurance - LTCi - Advantages

  1. Traditional & Hybrid: Avoid financial catastrophe and / or major financial disruption.

  2. Traditional might end up paying you much more in benefits than you ever paid into it

  3. Traditional & Hybrid: LTCi benefit might offer you additional care choices - in-home and / or -in facility - not available to you if you don't have LTCi and end up getting care provided by Medicaid.

  4. Traditional & Hybrid: Many carriers might not actually accept any money with application.

  5. Traditional & Hybrid: "Free Look:" After your policy first premium is paid and your policy is issued, your state might have a "Free Look" law requiring carrier to refund 100% of what you paid if you change your mind and do not accept the policy during the "Free Look" period.

  6. Hybrid: Premium / Benefits are frequently guaranteed once policy is issued.

  7. Hybrid: Typically might have a death benefit so your children / grandchildren / heirs / estate might recoup some - maybe much - of what you paid if you died without needing any LTCi benefit.

  8. Hybrid: Some might offer a Return of Premium guarantee

  9. Hybrid: Some might offer guaranteed cash value

Long-term care

How often is it covered?

"Long-term care is a range of services and support for your personal care needs. Most long-term care isn't medical care, but rather help with basic personal tasks of everyday life, sometimes called activities of daily living.

Medicare doesn’t cover long-term care (also called custodial care), if that's the only care you need. Most nursing home care is custodial care."


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