Jumat, 19 Juli 2013

Gender Based Pricing and Long Term Care Insurance

Life insurance and health insurance have always been priced according to gender. Traditionally, life insurance for women has been cheaper than men because of longer life expectancy. For life insurance, it is cut and dry and the statistics prove out the rationale for the pricing policy. Recently, as discussed in an article in the Washington Post earlier this year, Genworth announced a switch to gender based pricing for long term care insurance as well.

Unlike life insurance, LTC is still relatively immature. Time will tell if the actuarial data supporting sex based premiums is justified. I believe that traditional LTC is still working on pricing and other aspects to, once and for all, find a solution to the financial impact of a long term medical situation. Policy design, benefits and premium structure have all seen changes in the last few years and I expect this to continue.

The Post article alludes to more changes regarding the impact of the sex of the applicant and the premiums for long term care. It is commonly known within the industry that women will experience a greater financial costs associated with care than men. The insurance companies are now going to put this to the test by going to gender based pricing. Another line of discussion within the insurance industry is whether new gender based pricing is rooted in the Affordable Care Act (aka Obamacare.) The new regulation prohibits health insurance providers from charging based on gender. So, are insurance companies testing the market to account for lost revenue resulting from new government policies?

Regardless, long term care is still a viable solution to the needs of many clients. However, there are also other solutions available, like linked benefit plans, where women can get lower pricing when the linked benefit plan is using a life insurance chassis. So, for some agents, linked benefits may provide a better client solution over traditional long term care.

Regardless of sex of your client, traditional LTC and linked benefit plans should be evaluated and considered when seeking a long term care policy solution for clients. We like these policies for a variety of reasons and, if you are considering LTC or life insurance options for clients, we encourage you evaluate options like linked benefits or the addition of a long term care rider. You might find that the upside offered by a linked benefit policy helps secure your next deal.

Do you sell life insurance or long term care? Need client alternatives? As a leading general agent Life Marketers can help you succeed in the marketing and sale of life insurance, long term care, disability insurance, and annuities. Visit us at http://www.lifemarketers.com. Visit our blog for more articles that examine the issues agents must confront in the sales and marketing efforts.


What Is Long-Term Care Insurance And Why Is It Important?

What Do We Mean By Long-Term Care Insurance?

Long-term care insurance is a specific insurance product that is only sold in Canada, the UK, and the US and helps individuals to pay for care costs that exceed a pre-set period of time. It is oftentimes abbreviated as LTC or LTCi. In any case, this type of insurance covers what health insurance, Medicaid, and Medicare typically do not including your assets in certain situations. The key advantage that this type of insurance provides is that it alleviates the burden of your children having to take care of you the rest of your life.

In most cases, it is provided to those individuals who can no longer perform those activities and tasks that are required in everyday life. This includes:

• adult day care
• Alzheimer's facilities
• assisted living
• hospice care
• nursing home facilities
• respite care (interim, short-term care occurring prior to being admitted to long-term care)

It can also pay for in-home care should that be needed and in most instances, from the first day that it is needed. It also pays for live-in or visiting:

• caregivers
• companions
• housekeepers
• private duty nurses
• therapists

Additionally, coverage up to the maximum policy benefit is provided 24/7. So as you can see, the coverage provided is very comprehensive.

Why Is Long-Term Care Insurance So Important?

It is extremely important because of the above benefits that it provides the policy holder. However, it provides additional benefits as well, including:

It helps cover out-of-pocket expenses so the individual does not have to feel embarrassed or uncomfortable about their children having to care for them. Savings accounts can be quickly depleted if an individual or his/her family has to pay for those long-term care expenses.

In some cases, the premiums paid for the policy can be deducted on the person's income taxes. The age of the individual determines the size of their income tax deduction. Plus, the benefits paid by the policy can be omitted from the person's gross income.

The amount of premium deductions for businesses is usually determined by the particular type of business. Those premiums are usually 100% deductible for the corporation paying them provided they have not included them in the taxable income of the employee.

Just remember that without long-term care insurance, you (or one of your children or other family members) will have to incur all your expenses (up to $70,000 annually for nursing home care). If you don't have Long-Term Care Insurance then what assets will you liquidate when you need care? What if you need that care for 2-4 years? We are living longer and with better quality of life, due to great medical advancement, which means you may just want help at home. Home care is growing and preferred in most cases. Most of us will want to live in our own home as long as possible. At some point it may make life easier and lengthen the number of years we can live at home by simply having long-term care benefits.

Long-Term Care Statistics Can Be Misleading

A recent national newspaper article shared alarming statistics on the cost and probability of long-term care. The information was gleaned from a reliable Website and contained data provided by an insurance agent (thus including an inherent bias), and outlined these facts: one out of every two Americans will need long-term care and more than 40 percent of Americans will need some type of nursing home care. In reality, these numbers are misleading and not as burdensome as some may have the public believe. However, long-term care costs can be substantial and it is imperative for investors to assess the potential costs for long-term care and forecast the impact on their investment portfolios.

Tricky Situations

Yes, it is true that 70 percent of people may, at some point, need long-term care-but only for what will really be a short time period. Let's look at a possible scenario. An 80-year-old male is being treated for Non-Hodgkin's lymphoma. He receives chemo treatments and becomes sick as a result of a compromised immune system. Now he suffers from pneumonia and is admitted to a nursing home until he can recover in a week or two. Our patient is now within the 70 percent statistic of people who receive long-term care and also the 40 percent metric of someone who needs nursing home care. And this 80-year-old's medical needs would be covered under Medicare for two key reasons: skilled nursing care is covered and his condition is improving as he recovers from the pneumonia. (What Medicare does not cover is the inability to conduct activities of daily living like feeding yourself, toileting,or getting dressed.) But then the unexpected happens: This 80-year-old patient suffers from complications and does not recover from the lymphoma. He dies within a few months. He never spent a penny of his own money or filed a claim for long-term care benefits. In other words, he did not need long-term care coverage.

Medicare states that only one out of 10 people will be in a nursing home for five years or longer. For the majority, the current average stay in a nursing home for those over age 65 is 2.5 years, according to the National Association of Insurance Commissioners(although as people live longer, that average is increasing). This is not to say we should be cavalier about the risk of long-term care-we just need to understand the reality of the statistics and the severity of the liability. The truly scary scenario, although the exception, is the person who has a cognitive disorder, such as Alzheimer's Disease, spends 15 years or more in a facility.

The prudent and smart advice to give is this: Plan ahead for the possibility that long-term care is needed. But how do you measure the impact of long-term care costs on your finances? The first step in the evaluation process is to find the average cost of long-term care in your area and then analyze the impact of this annual cost on your investment portfolio. For example, if you live in Texas, the annual cost of care would be approximately $68,000, by today's standards. Would this prematurely deplete your resources? If the answer is no, you may not want to insure this risk. On the other hand, if you live in Manhattan, the cost for care may be a multiple of $68,000, making insurance a necessity for your situation.

When planning for the future, another consideration is the type of care you would prefer. There are big cost differences between in-home private care and in-facility care. But with either choice, the overall expenses can double or triple over time. As a safeguard, it is imperative to closely review the impact of this cost against your personal financial situation.

People buy insurance for the practical implications as well as for the peace of mind that comes from knowing you and your loved ones are covered. If owning a long-term care insurance policy gives you that assurance, then the premium is well worth the cost. The bottom line is to be informed of your options, future costs, and potential portfolio impact. This is the best way to avoid being surprised later on.


What Is Long Term Care?

When asked whether they've known someone who needed long term care before, many will answer negatively because they've never had experience with a relative or family friend living in a nursing home. Unwittingly, these respondents have mistaken care for a place that it is provided. Unfortunately, this common response underscores a lack of understanding about this important retirement planning topic.

It's easy to understand long term care (LTC) because it is exactly what it sounds like: care provided for a long term of at least 90 days or longer to anyone with a prolonged illness, disability, chronic need, or cognitive impairment. Millions across American spanning all age groups are receiving this kind of assistance that may last several months, several years, or even a lifetime.

By definition, this specialized healthcare is custodial in nature and provides assistance with the basic activities of daily living. A doctor certifies the need for this kind of help when their patient requires assistance with at least 2 of the 6 activities of daily living including:

    Eating
    Bathing
    Dressing
    Toileting
    Transferring (Walking)
    Continence

These services may be provided almost anywhere, but they are most commonly provided in the comfort of ones home. Care may also be provided in respite care, adult day care, assisted living, nursing home, and hospice facilities.

Once consumers are educated about this, many will then admit experience of a family member who needed care. Perhaps a grandparent, uncle or aunt received assistance in their home from a spouse, child, or relative. Maybe a surviving spouse required care and moved in with a child for family support. Statistics bear the truth of these experiences out since half of all LTC services are provided in the home.

With medical advances in healthcare, increasing longevity, and a growing senior population, the need for long term care is greater today than ever before. The need is even greater for women since their risk is twice that of their male counterparts. Women are often younger than their marriage partners and have longer life expectancies, so it's common for them to outlive their spouses who will not be there to help when their widowed partners need care for themselves.

Today, anecdotal and statistical evidence argues that it's absolutely critical that seniors and retirees educate themselves about long term care and how to pay for it. For many, insurance is the most effective way to manage this greatest unfunded financial risk in retirement.


Alternatives to Long Term Care Insurance

Long term care insurance is usually expensive. Some insurance agencies have difficulties balancing the price. Since healthcare costs have skyrocketed and continue to grow many long-term care providers need to raise prices to make a profit. Of course, you as the consumer also feel the sting of these price increases.

How badly do you need long-term care?

People live longer lives today and although this is a good thing it is also more expensive. I know it is a terrible thing to say, but living is not free and from a certain age you'll find yourself in the situation of depending on others. Old age may prevent us from doing some basic daily activities like eating, walking, bathing etc. However many people who need long term care are under 65!

It is expensive, but at the same time it can be a necessity. It is difficult to say what the future holds.

On the other hand, long term-care insurance doesn't always offer the best services. You shouldn't relay too much on the services offered by a company. Sometimes, it is better to take matters into your own hands!

What are the alternatives?

One obvious answer is self-financing. If you can afford it, you can pay for any eventual long-term care yourself. If you start early, you can save a lot of money by the time you retire for this purpose. The advantage is that even if you do not need long term care, you don't lose the money!

Relaying on family can also be a good idea if you have a close relationship with your relatives. You should discuss this issue with your children and other family members to see if someone is willing to take care of you if needed.

Life annuities. Purchasing a life annuity when you are younger will give you an additional income source when you are older. This will give you better control over your money, because you can spend the money on whatever you want or need. Life annuities are similar to life insurance, only that they do not pay a benefit to the designated beneficiaries after the insured dies. Instead, the benefit is paid to you,. You will continue to receive regular payments up until you die.