The statistics can be found anywhere: just seven percent of Americans own Long Term Care Insurance policies. What could be a salvation for millions of families is largely ignored because of several factors:
- No one is forced or required to buy LTC insurance.
- Human condition: Denial is rampant, especially among men.
- Expense: LTC Insurance isn’t cheap, and it’s getting more expensive.
Today, we’ll tackle that third point: Expense.
At LTC Tree, our agents encounter lots of middle-income Americans being offered Cadillac-style LTC Insurance. If your net worth is $400,000 and you’re being sold a policy that costs $5,000/year, and you’re expected to pay this for 25-40 years, something doesn’t add up.
It seems that every agent or broker has a favorite “rider” or option to add on to YOUR insurance policy. Sales training encourages the use of some of these riders. What seems to be missing is logic. Let me address some of the most popular riders that are “tacked on” to too many LTC plans on the market:
- Zero-day Home Health Care. This one is good, but costs 10-12% more in many cases. You’ll pay that 10% for many years only to likely see Medicare cover the first 100 days of care. Or perhaps you opt to just pay it out of pocket. If you can’t handle a standard 90 day elimination period, perhaps LTC insurance isn’t for you.
- Shared Care. Running 18-30% over and above standard coverage, this rider appeals to couples in love. The thinking is that you selflessly give your benefits to your spouse upon death do us part. The flip side of the coin would be the case where you use up everything, leaving the spouse either limited or nothing when you die. For the extra cost, why not consider keeping individual policies but buying more tail-end years of coverage? We’ll be handle the math for you, just request one of our comparisons.
- Survivorship. Like Shared Care above, this rider seems to play into the romantic bone in buyers’ bodies. The idea is you pay a bit extra every year to leave your spouse a paid-up policy when you die. Here are two reasons I recommend against Survivorship… First, when one spouse passes away, the second is often left needing Long Term Care in short order. Once you start using your policy, your premiums are waived anyway. Second, when one of you dies, the other will see a reduction in premium anyway. You’ve paid for years for both of you, so how hard is it to continue paying for about half of the cost?
The “Hybrid” model I propose is to self-insure these common risks and let the insurer pick up the tab for the more scary 3-5 year LTC stay that decimates savings.
Learn more about all riders here:
