The Evolution of Medicare, Medicaid, and Social Security

There is little argument that, overall, government programs such as Medicare, Medicaid and Social Security are under severe financial pressure. Suggested remedies include means-tested premiums and co-payments. Reductions in benefits may make supplemental coverage necessary. If programs are preserved in their current state only for the most financially vulnerable, it is likely that those who will look for more private insurance solutions will be members of the middle-class and the affluent. Putting quality long term care insurance (LTCI) in place now locks in health, and premium age, helping stabilize some of your financial exposure in retirement. As government programs look more vulnerable, products like private long term care insurance become even more attractive.

Carrier Actions Prove Long Term Care Insurance is a Bargain 

Industry insiders are incredulous as to how some people can think that long term care insurance is a rip-off. If anyone wants proof that LTCI buyers can recognize a bargain when they see it, they need only consider how many insurance companies have been unsure of LTCI's ability to be profitable, and have actually left the market. The reality is that, like most insurance, LTCI seems very expensive until claim time. By the way, when an insurer leaves the LTCI market (stops writing new policies), existing policies are unaffected - they remain in force.

Lifetime Benefit Periods and May Not Be an Option for Buyers Who Wait 

As insurance companies start seeing more meaningful claims history, they make decisions about which policy designs they can afford to offer in the future (existing policies cannot be amended without the approval of the policyholder).   Some insurance companies have stopped offering the lifetime benefit period as an option at application, and, while lifetime benefit policies are still available from several insurance companies, many experts believe this benefit's days are numbered. If they're right, and the day comes when lifetime benefit policies are unavailable from any insurer, we may well look back on the policies available now as "the good old days."   This is reason enough to seriously consider purchasing a policy now.

Alternatives to Traditional Long Term Care Insurance Can Be Attractive 

Alternatives to traditional policies, such as life insurance with a rider for LTC or an accelerated death benefit, annuities with an LTC rider, and even critical illness coverage can look attractive. But, caveat emptor.   Though many alternative policies are first-rate, not all are. To avoid surprises, be sure to read the definitions of covered care and compare it to what traditional LTC insurance covers. Do the same with how one qualifies for policy benefits (how are benefits triggered?). Look past the stated pool of benefits on asset-based policies, and dig into exactly how much money can be used each month, and whether or how inflation is addressed. The effective value of a pool of money today is eroded if the amount that can be accessed in the future is inadequate.

Inflation Decision Deserves Extra Attention 

Whether to include an inflation rider on a policy - and if so, which rider - is not only an important consideration, but is also one of the most expensive policy options. In low inflation times, such as we're currently experiencing, it's easy to overlook the importance of adequate inflation protection. What is adequate is debatable, with the inflation rate for home-based care being negligible in recent history vs. the inflation rate for facility care, which has exceeded the consumer CPI by a few percentage points in many locations. Traditionally, 5% compound was the most popular option, but modern policies now offer other attractive options at application. One of the best ways to save on premium can be to keep more risk by purchasing a lower inflation rate, as opposed to choosing a shorter benefit period or longer elimination period.

He Who Hesitates Often Delays to the Point of Uninsurability: Deal with the Long Term Care Insurance Decision Sooner Rather Than Later 

Long term care insurance is best bought under age 65 from both a cost point of view and an eligibility point of view (one must qualify for the purchase with health). Given that there is no 'sweet spot' age in pricing, and that, as the procrastinator waits to buy coverage, the price goes up every year with his or her age, it's clear: if one plans on purchasing LTC insurance, the best strategy is to act sooner than later, locking in health and transferring risk to the insurance company while one can.

All things considered, some experts are calling this the "Golden Age of Long Term Care Insurance." Consider how the risk of extended care could impact your retirement plan, as well as the inheritance you may leave a spouse or other family members. From a financial point of view, reducing this risk through long term care makes sense. Add the emotional costs of unfunded caregiving and the need becomes imperative.