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Long-Term Care Insurance, Part 1: Factors to Consider

As an estate planning firm, Phelps LaClair (serving the greater Phoenix metropolitan area), has much to say about planning ahead. In America, we plan for a career by pursuing a good education; or we save money for a downpayment in order to purchase a home. Applied to daily life, most of us will even plan a shopping list before we do our weekly run to the grocery store. As a whole, a good deal of life requires planning ahead. And preparation for old age is no exception, which is one reason we’re sharing this blog post as the first of several posts on Long-Term Care Insurance.

Planning for Long-Term Care

We’ve mentioned in previous posts that more than half of Americans will require some type of long-term care (LTC) as part of their aging process. No one anticipates needing LTC. But it is a reality that must be considered as part of good estate planning, since NOT being prepared could mean the unintended use of inheritance money, or even losing a home in order to pay for expenses.

Once you’ve grasped the importance of taking steps to plan for possible LTC, you’ll probably realize the process of sorting through your options can be rather confusing. There are different pathways for preparing, and knowing which one is best isn’t always easy. One of those options is purchasing Long-Term Care Insurance (LTCI), which will cover your long-term care expenses when the time comes. And just to clarify before we go any further in the discussion, we should add that we’re not necessarily advocating for or against LTCI as the ideal choicethese posts are simply one way of explaining this particular option for paying for Long-Term Care.

Long-Term Care InsuranceFactors to Consider

—AGE: The American Association For Long-Term Care Insurance recommends purchasing LTCI while you’re in your fifties. Premiums will be lower, since you’ll most likely be in good health and may qualify for a discount. Age is a factor in insurance premium costs, so waiting to purchase LTCI until you’re older could mean much higher premiums, or even disqualification due to health factors.

HEALTH: The American Association for LTCI also reports that, “The percentage of applicants who are declined for health reasons increases as one ages.” If you choose to go in the direction of purchasing an LTCI policy, it’s best to do so while you’re in good health. Once you’ve purchased a policy, you cannot be disqualified for health reasons. But if you try to purchase a policy when you’ve got health issues or take medications, you may find it more difficult.

—YEARLY PREMIUMS: If you’ve got a substantial financial portfolio and a good estate plan in place, yearly premiums that average somewhere in the neighborhood of $2,300.00 to $5,600.00 may not be a problem, even as rate increases occur through the years. Also, there are considerable deductions for purchasing joint policies with a spouse. But as you’re thinking ahead to the future, you want to be sure your income can continue to sustain the payment of premiums. Being unable to able to pay your premiums due to a shrinking income or other financial difficulties could mean losing coverage, not to mention the loss of all the money you’ve put into your policy.

—TYPES of POLICIES: Comprehensive policies will often pay out benefits for five years. Other policies will usually pay out benefits for one year.  Be aware that premium increases for comprehensive policies will probably be higher than those associated with a one-year policy. Know what you can afford, and know what each policy covers before signing on the dotted line.

In our next post we’ll look at the pros and cons of purchasing Long-Term Care Insurance. At Phelps LaClair, we certainly believe in planning ahead. But knowing what works best for you and for your family requires thoughtful discussion about your needs, your assets, and your future. Since helping you plan successfully is our passion, we invite you to contact our offices in the Phoenix region and schedule a consultation. You’ll be glad to know our first consultation is free.


Images used under creative commons licence (Commercial Use) (8/27/18) Pictures of Money (Flickr)

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