Are you asking “Why would I need to add a Long Term Care coverage rider on my life insurance I am still young and healthy”.
The short answer is “It’s because you are young and healthy”
Now onto the long answer, we never know when a long-term care event will happen and at what age. Lets back up a bit and talk about what a Life Insurance Long Term Care rider is and the benefits it can provide.
In October of 2009 The Long Term Insurance Act was drafted to establish standards for Long Term Care Insurance. ( http://www.naic.org/store/free/MDL-640.pdf ) Life Insurance Long Term Care Riders can provide access up to 2% of the life insurance face value for a maximum of $340 per day Per HIPPAA 2016 regulations. For example, you have a life insurance policy with a face value of $500,000 with a long-term care rider.
Face Value $500,000
Max Daily $340
Max Monthly $10,000
With this example you would receive $10,000 to help offset medical expenses and help replace some of your income. Depending on the type of Life Insurance Long Term Care Rider you have such as reimbursement you may need to submit receipts of invoices. With indemnity policies a check will be issues to you regardless of the actual expenses.
But what triggers a Long Term Care Event and when would you be able to file for benefits you may ask. A Long Term Care event is when you can no longer perform two of the six Activities Of Daily Living and they are: eating, bathing, dressing, toileting, transferring (walking) and continence. After the 90 day elimination period your benefits would begin.
There is a huge difference in the elimination period with insurance providers some refer to service days while others use a calendar days. Let me explain what a service day is, it’s when a medical provider comes and provides services. Services are not the nurse that stops in and helps you eat, use the toilet, brings your medication. It’s when an actual service is provided such as physical therapy. This could be 2 maybe three times a week. Start calculating when your benefits will actually begin if your service days are 3 times a week that’s only 12 service days a month so in could potentially take seven months for your benefits to begin.
I like to refer to Life Insurance with long term care riders as a living benefits policy because it can provide benefits that help provide the services to help you recover from a major medical event such as a heart attack, stroke, cancer, a major accident such as breaking a hip while slipping on a icy sidewalk. With the advances of medical science we no longer pass away from a major medical incident we normally survive to live on for many years.
Life insurance with long-term care riders can continue to provide benefits until the face value of the policy is exhausted but will reserve a portion to provide an actual death benefit. Using the example from above the policy would reserve $25,000 for the death benefit and use $475,000 for the long-term care benefit. That provides long term care benefits for nearly 4 years!
Now lets talk about what happens when you do not have long term care coverage when you have a major medical event. Did you know 66% of all bankruptcies filed are due to medical expenses incurred by a major medical event; medical insurance only pays a portion of costs leaving you to pay the balance. Another impact is to your family 33% of households lose income because they can no longer work as they care for you. Not to mention the emotional pressures as your family makes decisions on who will provide your care.
Let me explain why I am such an advocate for life insurance with long-term care riders because it has impacted my extended family dramatically. My niece was diagnosed with a brain tumor at the age of 18 she is now 21 years old. She has undergone five or six procedures that required for the doctors to open her scull to try to remove as much of the tumor as possible. Not to mention the dozens of other procedures. Cancer does not have an age limit and is relentless. Her parents are now her full-time care providers and to see the emotional stress and financial impact it has had on them is devastating. Their only option is to file bankruptcy but the medical bills are still piling up with little hope they will end anytime soon.
If that was not enough my brother in-law had a major stroke and he will likely never leave the long-term care facility. He had a successful business that they launched little over a year and a half ago but without him they have no business or income. They have lost everything and the medical bills will continue to pile up with no end in sight. The worst part is they had life insurance with long-term care but let it lapse. When I sold them the policy I explained the benefits and such but when push came to shove all they saw was it was just another bill. Discovery of the policy lapse was at his bedside in the ICU much too late for any hope of a reinstatement for the long-term care coverage.
The message I want to leave you with is we never know when or what life event is going to occur but we all will pass on leaving the question is are you prepared with proper protection for your family. Long-term care is an essential part of your estate protection plan. My recommendation to my clients is to purchase a Life Insurance policy that includes a long-term care rider that incorporates a 90-day calendar elimination period with indemnity payout. I also recommend depending on age an increasing value life insurance value.
Now where can you find such a policy? Your best source for life insurance with long-term care is a licensed health and life independent agent (ME). The reason to go to an independent agent is they are able to shop around for the best insurance providers and rates that fit your need. A captive agent (Not Me) only represents a specific provider with a limited number of choices for you; they can only sell what they have in their portfolio. In this scenario who has your best interest at heart? A independent agent is looking for a solution rather than giving you a sales pitch. So as you shop around for life insurance with long-term care here are some key things to consider:
· Who is the insurance provider and their rating
· What type of policy (Term, Indexed Universal Life, Whole life, Variable Universal Life)
· What form of elimination Period (Service or Calendar Day)
· What type of payout (Reimbursment, indemnity)
· What type of agent are you working with
· How are they calculating the face value of your policy
· How are they determining your rate class ( preferred plus, preferred, standard, etc)
· Smoker, Non-smoker
Remember your rate is determined by two main factors your age and your health. That’s the primary reason to obtain coverage when we are young and health. Put your agent to work and let them shop around so they can help find a affordable long term solution for your family.
Thanks for reading!
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Shane