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LTC Insurance Should Be A Key Piece Of An Income Plan

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The importance of long term care insurance as a piece of an income plan was underscored during a recent presentation at a conference on longevity.

Financial advisors contacted by National Underwriter affirmed the importance of having LTCI to ensure that income planning in retirement years is effective.

The presentation was made during the “Living to 100 Symposium” sponsored in January by the Society of Actuaries, Schaumburg, Ill. During the session on LTC insurance and underwriting challenges at the oldest ages, Stephen K. Holland, M.D., a senior vice president and medical director with Long Term Care Group, Inc., Eden Prairie, Minn., detailed data his company has gathered on LTCI, which underscores the importance of having a plan in place.

During his presentation, Holland discussed data from a Framingham study which shows that between ages 85-93 the number of those with Alzheimer’s type dementia skyrockets to about 70 per 1,000 in men and 145 per 1,000 in women compared with a respective 38 and 82 showing between ages 80-84.

The LTCG data underscores the importance of putting the LCTI piece of an income plan in place early in the income plan’s development.

Of a total of 8,929 fully underwritten applicants age 80 and older, the acceptance rate was 35.8% while 64.2% were declined. Between the ages of 80 and 95+, acceptances decline dramatically and declinations increase substantially. At age 80-84, acceptances totaled 41% and declinations 59%, a ratio that changes to a respective 26% to 74% at ages 85-89; 16% to 84% at ages 90-94; and, 6% to 94% at 95+.

And yet, in the 80+ age group, dementia and cognitive impairment lead the list of most frequently paid claimed events with 27% of the total followed by fractures/injuries with 12.4% and stroke with 12.3%, the LTCG data indicates.

The data also shows that the growth in paid benefits per dollar of premium collected goes from approximately 27 cents in the 80-84 age group to about $2.60 in the 95+ age category.

Ellen Dorle, a certified financial planner based in Columbus, Ohio, says it is “almost mandatory” to have LTCI, particularly if a client has significant assets. It is akin to having homeowner’s insurance in that you hope you don’t have to use it but want to have it, she explains.

And, she says it is part of the income planning process that she does for clients.

The cost of long term care insurance is a “big number” and getting bigger because clients are not lapsing their contracts, she says. The added cost would impact any income plan, Dorle says.

But the cost of care is also increasing dramatically and the cost of a contract rarely is more than 25% of the benefits received, Dorle says, so it is still important to have these contracts in place for clients. Dorle says she bought a contract when she was 51 and believes clients should have the same protection that she feels she has.

Dorle cites 3 clients who went on claim and were “incredibly grateful” that they had LTCI so that they could keep their income plan in place. One is a former model, about 80, who has a clear mind but trouble getting around. Another was a widow who watched her husband live with an oxygen tank and a third client was a person who in recent years had not been physically strong.

One couple who are clients bought LTCI when both were in their 40s and the husband became a type 1 diabetic in his 50s. There would be no chance of getting the quality of policy they had if they had waited, she says.

Mark Stein, president of AeGIS Financial Group, Phoenix, agrees that LTCI is an important part of an income plan, noting that the premiums paid for a contract over a period of years can be used in as little as a 6-month period after entry into a nursing home starts.

A contract is important in preserving income for the spouse, if a partner has to go into a nursing home, he explains.

The features he says are important when putting a contract in place include: a highly rated company, a 90-100 day waiting period; a benefit of $180-$200 a day; a 5% compound inflation COLA; and a 60-month benefit period.

If a couple’s income does not permit for all these features, he says it is still important to put a contract in place. In such cases, perhaps one spouse will be insured or the benefit selected will be $100 a day, Stein says.


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