Other Views
Other Views
RECENTLY I received a phone call from one of my long-term care insurance clients, Linda. She informed me that she received literature in the mail about a new long-term care "group program" for retired teachers. Cost of waiting
for long-term
care insuranceI had helped Linda obtain long-term care insurance about a year ago, and she wanted to know if her policy was still competitive in cost, company and features.
Because I specialize in long-term care insurance, and have researched many long-term care policies, Linda trusted that I'd give her a reasoned answer to her query.
Group insurance offerings for long-term care have become more available this year, and the natural expectation is that they will cost less and provide more benefits than individual policies do.
Sometimes they only partially do.
Group insurance may be offered through employers or associations. Some people would be surprised that employed, nonretired people buy long-term care insurance.
Prudent planning dictates early purchase for two important reasons:
In comparing Linda's policy with the one being offered by the retired teachers' organization, I was not really comparing a group plan with an individual plan. Both programs are available with and without group discounts.Those who wait risk the possibility that they won't be qualified later.
Let's call the plan Linda had in place Plan 1 and the newly announced plan Plan 2. In looking at these specific plans, I found at least these significant differences:
1) Plan 2 doesn't offer automatic compound inflation increases. It is extremely important for 64-year-old Linda to have this feature in her policy. By not having "automatic compound inflation increases," Linda, who is just 64 years, could pay premiums for 20 or more years, and then find herself without the ability to pay her care bills.
2) Mental disorders such as "depression, adjustment disorders, personality disorders, etc.," are specifically excluded by Plan 2. Some other policies do not have exclusions for "disability caused by psychological or psychiatric or mental conditions." Why not seek one of these?
3) Plan 2 is not less costly than other policies when you compare like features ("apples to apples").
4) Plan 2 does not incorporate a wonderful couple feature, "survivorship." When one spouse dies, the surviving spouse has paid up coverage for life, once having paid premiums for 10 years.
5) Plan 2 does not incorporate "restoration of benefit." This enables anyone who has a limited (e.g. four years) coverage to derive full benefit even if he or she has used up a portion of the benefit in temporary confinement.
6) Both insurance companies in this example are "excellent" and highly rated companies.
I phoned Linda and discussed my findings. She thanked me and agreed she has the right coverage.
What do we conclude about group coverage? Should you just wait? Should you skip the group plan? No.
Being cautious about selection criteria does not mean that waiting is advisable. Parkinson's disease, diabetes, lupus, strokes can happen before the age of 40 or 50 years of age, affecting the ability to qualify for long-term care insurance.
These are not necessarily genetic diseases. Just as often they are "idiopathic." When doctors say "idiopathic," they mean they do not know the cause of the illness.
The "cost of waiting" is best explained by example. One sample insurance policy would cost $580 per year and $20,283 to age 85 if taken out in August 1999 at 50 years of age. If taken out at 70 years, it would cost $60,911.
Group policies are a way of achieving affordability. Unfortunately, they are not always as beneficial as assumed. The specific insurance plan being offered may not be best for you. Perhaps the only right solution is for the group to offer more than one plan.
Work with someone who specializes in long-term care insurance to have a choice.
Vicki J. Beck is president of Quality Care Planning Inc.,
specializing in long-term care insurance in Honolulu.