4 Common Long Term Care Insurance Buying Mistakes

1. Assuming Group Long Term Care Insurance Coverage is a Good Deal

Do you know that you can typically get better benefits for the same or less premium by purchasing long term care insurance outside of an employer or a group setting. Surprised? Here is why.

Individually underwritten long term care insurance policies typically offer significant discounts for being Married or Partnered, and/or being in Preferred health. The Couples discount alone may be up to 40%.

Group long term care insurance policies often do not offer these Marital, Partner or Preferred health discounts. Group long term care insurance policies are typically offered at Standard health rates with no Partner discounts.

Secondly, many group long term care insurance policies have reduced benefits for home health care and/or care provided in assisted living facilities—typically a reduction of benefit between 25% and 50%.

Individual long term care insurance policies will pay out 100% of your benefit in all settings....Home Care, Assisted Living, or a Nursing Facility.

We have reviewed hundreds of group long term care insurance policies from very large employers: AT&T, IBM, Delta Airlines, UPS, and Lockheed Martin, to name a few. Often, an employee can obtain better benefits for less premium by applying for long term care insurance outside of the group plan.

2. Confusing the Two Types of Long Term Care Insurance Inflation Protection

Long term care insurance is typically available with two types of inflation protection:

1) Automatic inflation
2) Future Purchase Option

The biggest mistake long term care insurance buyers under the age of 75 usually make is purchasing a policy that only offers a Future Purchase Option and not an automatic increase factor.

With automatic inflation, your benefits increase every year by your elected factor, say 5% compound per year. Your LTC premium stays level.

With a Future Purchase Option, your LTC premium will start out lower than a long term care policy with automatic increases, but your LTC premium increases when you elect to buy more coverage.

Thus the intital lower premium is Fool's Gold.  Your premium will ultimately be much HIGHER if you try to keep up with inflation.

The below chart illustrates how the 2 options may differ.

Cautionary Note: many group long term care insurance policies usually only offer a Future Purchase Option design.

3. Buying too much or too little coverage.

Long term care costs average about $6000/month nationwide. Does this mean you need to buy $6000/month in benefits?

Maybe.

Maybe not.

Costs can vary widely by region of the country. In Mississippi, $3000/month in coverage might be OK. In New York, you might need $12,000/month to pay for your care.

To find out what long term care costs in the area you plan to retire, click on our Long Term Care Costs of Care Map. Also, please remember that you may have other income sources such as a pension or social security income that can help you to supplement a portion of your long term care costs, as well.

4. Choosing the wrong long term care insurance company

With long term care insurance, you may not make a claim for 20 to 30 years, or longer. Isn’t it important to know that the company you choose will be there in the future to pay your claim, when needed?  It is very important to only consider large stable companies with total asset size in the billions, and at least an “A Rating” from AM Best.

 Current financial ratings of the leading long term care insurance companies

If the long term care insurance company does not have an "A' rating from AM Best or if the company has less than a few billion in assets, it probably is not worth your consideration.  LTC Partner only works with the best long term care insurance companies.

To compare your long term care insurance options, and to receive your free long term care insurance quotes please call us toll free at 800-891-5824 today.  Buying long term care insurance can be easy.  We promise to answer your questions and provide you good advice and direction. Let us help you get started today.

Jack Lenenberg, J.D.