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The formula for finding the cost of a policy is first determined by 3 things which are out of our control;
  • Our age at the time of application
  • Our health at the time of application.
  • Are we healthy enough today to be accepted by an insurance company?

The remaining policy benefits are within our control when the following 4 choices are made.

  • Daily benefit , (The money will you receive every day of an illness, injury, etc.)
  • Inflation protection . (Determining how your money will grow over time.)
  • Elimination period. (Determining how long you are willing to wait for care).
  • Life-Time maximum , (determining how much $ you want to have access to for life)

Although choosing the right company and the right agent can be a confusing ordeal, determining the plans benefits is relatively straight forward if you choose a “specialist”. All LTCI companies use these same 4 choices to determine the value of the plan and the cost of the premium.

Example:

  • Mrs. Jones is 59 years old.
  • She believes that she needs $150.00 per day to pay for today’s average cost of care.
  • Assume she chooses the 5% compound inflation option, so her money will grow for the future.
  • Assume she chooses a 100 day elimination period. (for nursing homes only)
  • Assume she chooses the “4 year” plan
  • 4 Years contains 1460 days
  • 1460 days x her daily benefit of $150.00 per day = $219,000.00 to use for the rest of her life.
  • Based on her age, current health, and this example plan, her premium is appx. $ 2,200.00 per year.

Let’s further assume that she needs “no care”, until she is 80 years old, and that she pays the full amount of the policy until she’s 80 years old. (Premium is waived when using the policy & it may be tax deductible, so the cost may be less.) (We also don’t know when her health will change.)

In this example , Mrs. Jones has paid a total of $46,200.00 in premium over the 21 years. (59 to 80 yrs. Old)

Although $46,000.00 is a good sum of money, it will only pay for 6 months in a nursing home “today”, and at a 5% medical inflation rate, her $46,000 will only pay for care in a nursing home for “11 weeks” by the time she’s 80 years old. Please know that there are “many” plans available that can cost more or less depending on personal choice.

Again, policies vary, additional riders vary, and custom tailored plans vary in benefits and in price. In all cases however, paying for a long-term care policy will always be a small fraction of paying for care yourself. The chance of using a policy is ½ of all women and 1/3 of all men. Realistically, it’s the greatest risk “all of us” face.

In a recent Consumer Report article, they suggested that people 55+ should get at least “some” coverage. We think they captured the true essence of LTC cost when they wrote, “Just because you can’t afford a Cadillac, it doesn’t mean you have to walk.” Everyone is different, which is why we try so hard to find the “proper fit”.

Some insurance companies will return all monies paid into the plan if care is not needed.

Protecting Tomorrow’s independence …Today




Sweeney & Associates 781.924.1637 info@longtermcareprotection.com

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