Cost of Long Term Care


A lot of people incorrectly assume that health insurance and Medicare will cover long term care. They cover medically necessary care for up to 100 days, or until you stop improving or stablize. After that, you’re on your own.

The majority of Americans over 60 do not have long term care insurance yet 70% will need care. So, why do people not buy insurance?

Most will say the cost of the policy. An average policy, depending on age, health and benefits chosen, will cost $1,000-$3,000 per year per person.

But what about the fact that the same people who say they will “self-insure” for long term care will never “self-insure” a parking meter… they always put money in the meter, even though they could easily afford and “self-insure” the parking fine.

We make decisions based mostly on emotion. That’s what causes people to buy stocks when they are high and sell when it crashes, the opposite of what seasoned investors do.

What if you “self-insure” for long term care, how much will it cost you? The national average for nursing home care is $89,000/year with some areas over $140,000/year. Home care and assisted living average $50,000/year. See how much care cost in your state: download the Cost of Care brochure.

For every $1,000 of monthly retirement income you want to generate from your own savings, you will need about $230,000 in assets, according to the Schwab Center for Investment Research. For example, if you want only $3,000 a month, or $36,000 a year, you would need savings of $690,000. That’s a conservative estimate, assuming that you earn 5.2% on your investments and live off the earnings without dipping into the principal.

If you cannot afford a long term care insurance policy, how are you going to afford paying out of pocket? The other option is spending all your cash for your care. This includes anything of cash value: savings, investments like stocks, bonds, life insurance, annuities. Medicaid allows you can keep only $2,000.

There are 30 states with filial laws that allow the state to make your children repay Medicaid for your care expenses, although this is rarely done. Fifteen years ago the #1 reason people bought long term care insurance was they did not want to be a burden on their family. Today, the #1 reason is people do not want to outlive their money (and end up on Medicaid-Welfare Health Care).

Some people will buy long term care insurance for asset protection. Most states have a Partnership program that will protect assets from Medicaid if you own a Partnership long term care insurance policy.

You have five options to pay for long term care:

1. Self-insure.

2. Long term care insurance and Partnership.

3. Life insurance with long term care rider.

4. Annuity with long term care rider.

5. Medicaid.

The life insurance and annuity do not qualify for the Partnership (neither do group LTC policies). The life/LTC or annuity/LTC are often bought because: the person’s health will not qualify for traditional LTC insurance, or the person has too many cash assets and they’d never spend down to qualify for Medicaid. An old life policy or old annuity can be converted to one with long term care benefits without paying capital gains.

You can continue down the same road, uninsured, until either a diagnosis or a serious change of health, like a stroke, will disqualify you from insuring. Then you will only qualify for state assistance. At that point you would have to have used, sold or given away your assets 5 years before applying for Medicaid. Who has the ability to see 5 years into the future?

*  The best age to insure: the age your health will still insure you.
*  The best benefits to get: enough to cover what you cannot afford to pay out of pocket.

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30 States Have Laws Requiring Children to Repay Medicaid for Parents Care



Filial responsibility laws date back to 17th century English law requiring children to financially support their parents when they couldn’t support themselves.

Because of age, or maybe an illness like Alzheimer’s, millions of Americans are no longer able to take care of themselves.

Spending one’s own money for care can wipe out a life’s savings in a short time. It could be someone in your family.

What happens when the money runs out? Out of love, you may feel a moral obligation to help. In some states, however, you may be legally responsible for paying your parents’ long-term care.

In these days of economic uncertainty it is essential that people have a sense of security in terms of their future. Long term care insurance is a way to preserve that.

Like car insurance, the prices for long term care insurance will vary by company. The premium will depend on your age, health and the benefits you want.
The LTC Partnership Program provides asset protection in most states.

Since care cost differs by type and location it is important to get the right information to make an informed decision.

Other than transferring your assets to an irrevocable trust five years before you apply for Medicaid, the only way to protect your estate from Medicaid is with a Partnership long term care policy.


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Why You Should Consider Long Term Care Insurance in Your Retirement Planning

If you haven’t already done so, now is an excellent time to consider adding long term care insurance to your retirement portfolio. Because uninsured long term care expenses can pose a significant risk to the assets you’ve worked a lifetime to accumulate, long term care insurance should be considered as part of a complete financial plan.
As former Senator told the United States Senate Special Committee on Aging, “Although the need for health insurance to cover a patient’s medical expenses in case of catastrophic illness is widely recognized, few people are insured against the costs of providing long term support services for that same person. This lack of insurance coverage jeopardizes the financial security of families and diminishes the economic security of the country.”
The likelihood that you may need long term care is significant.  Some 70% of Americans who reach the age of 70 can expect to utilize some type of long-term care during the remainder of their lives.  And while long term care includes a broad range of services, from in-home care to nursing home care, each comes at a cost.  Those costs could be substantial, and could have a significant adverse effect on your retirement portfolio.
Why? Most forms of health insurance focus on medical expenses, not the custodial care and nonmedical expenses associated with long term care. Medicare only covers nursing home care after a related three-day inpatient hospital stay and even then for only 20 days before a daily co-payment is assessed and Medicare only covers a total of 100 days.

Medicaid doesn’t kick in until one has spent down a significant portion of their assets (spend-down to $2,000*).  Therefore, if either you or your spouse needs long term care, you may have to pay for that care out of your accumulated assets … unless you have long term care insurance.

genworth-nursing-cost-2016The average cost of a private room in a nursing home met or exceeded $80,000 annually.  If one partner needs such care, the cost could quickly and substantially erode the assets acquired over a lifetime.
Let’s use a hypothetical couple living off the interest of $500,000 of invested assets to illustrate how serious an impact long term care expenses could have.

For the sake of this discussion, assume the couples’ investments are earning approximately eight percent annually, generating about $40,000 per year in income.  Let’s also presume this couple needs all of this income to support them while they’re living together in their home.
Based on an $80,000 annual cost for nursing home care, it may appear that this couple has enough for a little more than six years of care. However, that basic calculation does not consider the living expenses of the spouse who remains in the community.  

If this couple is using all of their investment income to provide for their living expenses, they will soon need to start withdrawing from the principle for a portion of those living expenses as well as for the long term care expenses of the partner who needs care.
In circumstances like these, it’s easy to see how the assets accumulated over a lifetime could soon be completely exhausted.
Long term care insurance can help provide the funds to pay for the care you may need, while simultaneously protecting the assets you’ve worked a lifetime to accumulate. Long term care insurance may also help preserve financial independence, choice, and dignity, and those can be priceless.
It’s never too early to consider insurance because your health can change at any time, meaning you may be uninsurable and end up paying out-of-pocket.

The Partnership Asset Protection program is available in most states. This will protect your home and assets to the limit as was paid by a qualified policy.

Some people have too many assets to benefit from the Partnership. They may prefer an annuity or life insurance with a long term care rider. You can use an existing whole/universal life policy or existing annuity to fund a new policy with long term care coverage. The Pension Protection Act allows this transfer without having to pay capital gains.

Feel free to contact us for more information or for an updated quote.

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.* States can differ on spend-down.




How Your Genes Affect Insurance

images-2Genetic testing can be very useful for diagnosis, prevention, and treatment of hereditary diseases. The ability to predict what health problems may come up in the future has a great potential benefit to health. Early diagnosis and treatment can be life-saving; also ruling out diseases can be a relief. By knowing in advance what diseases they may get, people can modify their diet and other habits to delay or prevent health problems as they age.

However, scientists’ new ability to predict illness through genes leads to ethical questions. Insurers can use genetic testing to predict which individuals are a good or bad risk, and then to decide who will be eligible for insurance and at what premiums.

The Genetic Information Nondiscrimination Act of 2008 (GINA) forbids health insurance companies and most employers to discriminate based on the results of genetic testing. The Affordable Care Act makes it illegal for health insurers to deny coverage or charge higher premiums because of pre-existing conditions, including hereditary conditions. 

However, GINA does not cover life insurance, disability insurance, or long term care insurance. Only in a few states are there laws prohibiting these types of insurance from being denied based on genetic testing. In the rest of the states, insurers can use genetic testing results to make decisions about coverage and premiums.

images-1People who suspect they have a hereditary condition may get a test from a doctor. But there are also companies that offer genetic tests online directly to the public, for fun and to learn about one’s ancestry, with some health information included. The customer mails in a saliva sample. These tests are not presented as serious medical tests; however, if you get any genetic test and later apply for insurance, you will be required to report health information you learned, even if the test was not from a doctor. If you withhold medical information, you can have your policy terminated or your claims denied later, when the information comes to light.

Another drawback to genetic testing is that finding out about heredity diseases can sometimes change a person’s outlook on life, if he or she knows that a progressive degenerative disease will likely develop. This knowledge may also affect relatives who could have similar genes.

So far, genetic tests are only available for a small percentage of diseases. Some argue that it is unfair to discriminate against whose tests show the few diseases that can be identified, when other people have health conditions that will not show up. Also, though genes can show the possibility of disease, there are other factors (such as environment, lifestyle, diet, life events) that determine a person’s health and longevity.

People who are considering genetic testing may be wise to enroll in the insurance policies they want before getting the tests. There are genetic counseling services that can help applicants understand the benefits and risks.

To find out more about long term care insurance, including life insurance and annuities with a long term care rider, see Guide To Long Term Care.

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Good News for Long Term Care Insurance Companies and Policy Holders

Long term care insurers are paying more in claims in 2016, and expect the increase in claim benefits to continue in future years. Around $8.15 billion in claim benefits were paid to 260,000 insured individuals in 2015; In 2014 there were benefits amounting to $7.85 billion paid to roughly 250,000 individuals.

Why the increase? First, more people are living to be older. Also, many policies have a 5% compound inflation, which increases benefits. And of course, some of the increase in claims payments is caused by increases in the cost of care.

The difference between low-cost and high-cost policies remains between 20% and 90%, but monthly premiums are not rising, because the number of policy holders claiming benefits is already factored in to the monthly premium.

The average cost for a long term care policy has gone down in 2016. The lowest price for one of the better policies is $873 a year or $72 a month for a 55-year-old single man. In 2015 it was $1060 or $88 a month. For a 55-year-old single woman, the lowest price in 2016 is $1100 a year or $91 per month. In 2015 it was $1,390 a year or $115 per month.

Linked benefit plans, including life insurance with a long term care rider and annuities with a long term care rider, have been popular since 2014. Sometimes linked benefit plans will be the best option for people who have pre-existing conditions that disqualify them from getting traditional long term care insurance.


Long term care insurance policies have a relationship with interest rates. The extended period of low interest rates for the last decade forced some long term care insurers out of business. The Federal Reserve raised its key interest rate in December, from a range of zero to 0.25 percent to a range of 0.25 percent to 0.5 percent. Insurers mainly invest in bonds or fixed income securities and not equities; therefore higher interest rates are good news for them.

The reason monthly premiums increased over the past few years was that interest rates were declining. Now, rising interest rates will bring additional revenue to long term care insurers, making it possible for them to lower their premiums. According to the American Association for Long Term Care Insurance (AALTCI), a 1% increase in long term interest rates can mean a 10% to 15% decline in policy premiums.


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John Hancock’s New Performance LTC

John Hancock’s newest long term care insurance policy the Performance LTC is entirely different than other companies. The older one gets the lower their premium.*

Click on sample charts below then cick again (+) to see full size. Contact us if you have any questions.


  • if Flex Credit is used to pay towards premium.

Performance LTC is not yet Partnership qualified in these states: AZ, CA, DE, IL, IN, KY, MD, NV, NM, NC, NY, OK, PA, UT, WA.

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Tips for Buyers: LTC Insurance Health Assessment

Insurance companies will request a health assessment (interview) to be done either by phone or in-person. Insurance companies outsource the testing to paramedical companies.

When you are called to set your appointment they will identify themselves and the insurance company and they will let you know if it is a phone interview or a face-to-face interview.

Schedule the meeting for a time that is convenient and when you will not be too tired or too distracted.

The interview is an important part of the health underwriting/approval process. It is important to remember to be calm and focused. Also turn off your phone so not to be interrupted and only answer the questions asked.

More LTC insurers are requiring in-person or telephone interviews as well as physical exams, according to Joe Sperling, J.D. He said he reminds clients that the interviewers work for the insurer, which means applicants should be honest but stick to the point when answering interview questions. It’s the same advice an attorney would give a client who is about to testify in court: answer the question, don’t go beyond it, don’t volunteer, he said.

“The examiner is not their high school buddy,” Sperling said. “The examiner is there to ask questions about your medical history. You want to answer the questions, be succinct and not elaborate. A natural tendency is to get a little bit too verbose. Rein that in. The danger is getting into the embellishment because there’s nothing good to happen there.” 

Do not intentionally exclude information that is related to your health. The underwriter will be reviewing your medical record and will compare that to the application and health assessment. If you do remember something later that you had not disclosed during the exam contact your insurance agent.

Term vs Permanent Life — Which Costs Less?

This short video compares Term life insurance with Whole or Universal life insurance. Keeping this in mind, there are Whole and Universal life insurance policies available that have long term care riders. If you use a portion or none of the life/LTC policy for long term care (tax-free) your beneficiaries will receive a tax-free death benefit.

If you currently have a Whole or Universal life policy that has a cash value the Pension Protection Act allows you to convert it to a Whole or Universal life policy with long term care benefits without paying tax on gains. Contact us for quotes or more information.

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What Are Your 401k/IRA and RMD Plans?


What is Asset-Care III Life/LTC?

Utilize IRA or retirement plan funds
for long term care protection.

• Individual Retirement Annuity (IRA) that funds a 20-payment whole life policy with accelerated death benefit for qualifying LTC expenses
• Available for issue ages 591/2–80 (age last birthday)
• Typically funded through money currently in qualified retirement plans such as 401(k)s, 403(b)s and IRAs

Policy provides up to 2% of annuity value and up to 2% of life insurance death benefit per month, per insured subject to policy limits. Applies to nursing facility, assisted living and home care. Option to use LTC benefits up to 3 or 4% per month, per insured (additional premium required). No surrender charges apply on withdrawn LTC benefits.

• Return of premium (all years)
• Life policy LTC benefits increase over a 20-year premium payment period
• Life premium will not increase
• Cash value growth

IRA policy is funded at issue. Whole life policy is funded through annual withdrawals from annuity. Life policy is paid up after 20 years. Premium amount is guaranteed at issue.

From annuity (IRA): 10% of cash value withdrawn annually without surrender charge. It is very important to note, amount withdrawn to pay life policy premium is included in 10% available. Also, no surrender charge applies for any minimum distribution withdrawal in excess of premium for life insurance. Up to 2% of cash value per month per person without surrender charge for LTC payments. From life insurance: loans made at 4% net cost.

LTC benefits Under the Health Insurance Portability and Accountability Act of 1996, Asset-Care insureds who receive LTC benefits from their policy will have the entire amount of LTC benefits treated as an income tax-free prepayment of the death benefit. Annuity withdrawals on Asset-Care III will be taxable to the extent of gain, which could be deducted to the extent it is considered an unreimbursed medical expense (and exceeds 10% of the taxpayer’s adjusted gross income).

Death benefits Asset-Care III Amounts not paid for LTC benefits under the life policy pass income tax-free to the named beneficiary. If the spouse is the beneficiary on the IRA, the spouse can assume the policy and continue to defer any gain or select a payment option.

Loans and withdrawals Asset-Care III Life Policy Based on annual premiums (withdrawals from the annuity), the life policy will be a MEC at all issue ages.

Asset-Care III annuity policy Withdrawals from the IRA portion will be fully taxable like any IRA. Annuity withdrawals by an owner less than age 591/2 are subject to income tax and an additional 10% tax by the IRS.1 IRA withdrawals taken to fund the life policy are taxable as ordinary income.

Free withdrawals Asset-Care III (from annuity) Up to 10% of the cash value can be withdrawn annually without a surrender charge. The amount withdrawn to pay the life policy premium is included in the 10% withdrawal amount.

Required Minimum Distribution (Asset-Care III annuity) State Life will calculate the required minimum distribution after age 701/2 in accordance with current tax regulations. Any minimum distribution in excess of the life premium will be forwarded directly to the policyholder.

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