Foresight Care Planning, LLC

Long-Term Care (LTC) insurance coverage should be tailored to the needs of each individual and their family. Those needs include the cost of care in the area where you live, the assets you want to protect, and the amount you are willing and able to pay out-of-pocket should you prefer to co-insure a portion of the risk in order to reduce the premium. It is also important to focus on quality of care issues and other peripheral concerns that are important to you and your family. The role of Foresight Care Planning, LLC is to serve as an “Advocate” for each client and the following are several ways to obtain whatever level of LTC insurance coverage that may be appropriate, while also ensuring that the premiums are as economical as possible. Apply for coverage at an early age. The older the age of the applicant, the higher the premium will be for a given LTC insurance policy. Every year you wait, both the premium rates and the daily cost of care in your geographic market increase. For example, the cost of care is projected to double every 14 years so if someone who is age 50 waits until the age of 65 to apply for coverage, they would have to purchase twice the amount of benefit at the cost for a 65 year old instead of a 50 year old in the premium rate guide, thus substantially increasing the cost of a policy. Applying for coverage at the earliest age possible will result in a lower annual premium and should enable you to pay less in total premiums over the course of your lifetime. Investigate Financially Strong Insurance Companies. Choosing the right insurance company is critical when obtaining a long-term care policy. Look at companies that have solid financial ratings, large cash reserves, large base of policyholders and no (or limited) history of rate increases on existing policyholders. Artificially low premiums, especially if combined with lenient underwriting, are a recipe for premium increases in the future. Leverage your good health. As with most life insurance policies, LTC insurance policies have lower premiums for those whose health is good at the time of application. The longer you wait, the greater your risk that your health will deteriorate. If your health declines, you could face higher premiums or may not be able to purchase protection at any price. If you have good health, remember that it is to your advantage to apply with an insurance company that has strict underwriting guidelines. This promotes rate stability and substantive benefit packages. Group Plans that have “Guaranteed Issue” or “Simplified Underwriting” provisions may not be the best alternative for those who have excellent “health leverage”. Only Accept Policies With “Stand-By Assistance or Hands-On” Requirements. Language that requires “Stand-by and Hands-on” assistance to satisfy Activities of Daily Living (ADL) requirements makes it much harder to become eligible for benefits. This requirement is within the definition of “Substantial Assistance” and is the most critical sentence in the entire policy contract. Beware of “Future Purchase Option” (FPO) Inflation Programs. Instead having an automatic inflation component in the plan, FPO plans allow you to purchase additional coverage every two or three years to increase your daily benefit. The premiums start artificially low and can become outrageously high for young and middle-aged applicants because each increase is based on your attained (new) age, which always has a higher calculation in the premium formula. Consider co-insuring future costs. When considering a policy, consider how much income you will have available each month from investments, pensions, Social Security, and other sources. If you are able to do so, you may choose to use some of this income to pay out-of-pocket for a portion of whatever LTC services you require. Critical Note: Make sure that you understand the effect that inflation has on co-insurance amounts. For example, if the average cost of care in an area is $6,000.00 per month ($200 per day) and you can afford to co-insure $1,500.00 per month, you can consider a monthly benefit of $4,500.00 ($150.00 per day). However, if both the cost of care and the benefit increase at 5% annually, the projected co-insurance can grow drastically over a long period of time because the cost of care at $6,000.00 is a larger number than the smaller benefit amount of $4,500.00 and will grow faster. If the client is age 50, the projected monthly co-insurance would grow to $8,274.02 per month by age 85 based on the assumption that both the cost of care and the benefit increases at 5% annually. If the client wants to try limit the co-insurance at around $1,500.00 per month for the life of a policy, a monthly starting benefit of $5,700.00 ($190.00) per day would create a projected co-insurance of $300.00 per month at the age of 50 that would grow to $1,654.80 at the age of 85. By increasing the starting daily benefit of $150.00 to $190.00, the client is reducing the projected co-insurance for a three year claim at age 85 from $297,864.83 to $59,572.97. This is the most common mistake in long-term care insurance plan design. It is imperative that you and your advisor must be clear on today’s risk and benefit dollars, compared to those factors over an extended period of time. Select an appropriate Elimination Period (EP). The EP or “waiting period” is the length of time the individual must pay for covered services before the insurance company will begin to make benefit payments. A longer EP results in a lower premium, but there is a trade off between a lower premium and benefits paid. In today’s dollars, a 90-Day EP with a daily benefit of $200.00 means that you are sacrificing up to $18,000.00 in benefits the first 90 days. In 30 years, when the daily benefit has grown to $823.23 (5% Compound Inflation), a 90-Day EP would total $74,090.70. Make sure you compare the differences in premiums for a variety of EP’s including 90, 60, 30 or Zero-Day and understand the effect that each would have in the future. Investigate a couple’s discount . If a couple applies for LTC insurance at the same time, most insurers offer a spousal discount normally ranging from 30% to 40% on both policies. This is why it is important to be proactive now, because there are some medical conditions that might make one spouse ineligible to apply for coverage and would result in a reduction or elimination of the spousal discount for the healthy spouse. Compare Expense Reimbursement Products with Indemnity Products. The majority of LTC plans utilize Expense Reimbursement Plans to distribute benefits. These plans pay to the penny the actual approved expenses incurred. Most of these plans will not allow family members or friends to be reimbursed for companion services provided unless they are employed by a licensed agency. Indemnity Distribution Plans pay then entire daily benefit after the first charge each day from a licensed agency. The remaining tax-free benefit can then be used for anything, including payment of family members or friends and items such as medication that may not be covered by other plans. This provides more flexibility and care options. Summary Eliminate carriers with poor financial ratings and/or legal loopholes within the insurance contract from consideration at the beginning of the evaluation process. Choose a proper benefit amount based on your finances, risk tolerance and the cost of care in the community that you intend to retire in. Make sure that you take advantage of any “Health Leverage” and focus more on obtaining a Preferred Health Rating instead of a smaller “Group Discount” that may not include a Preferred Health Discount. This is one of the most common mistakes that I run into when I review long-term care policies already in place. Once you have addressed the first three steps, you are in a better position to pick the most “cost effective” (lowest) premium. By having the Foresight to obtain a solid plan, you can reduce the chances of a negative “Hindsight Experience” of a rate increase or a policy that does not meet your needs and expectations in the event of a claim. Seek advice from a professional who works full-time in LTC Planning and understands how to apply each of these techniques.

Address: 4401 Wythe Avenue, Richmond, Virginia 23221, USA

Phone: +1 804 690 7328
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