An Introduction to Long Term Care Insurance

THE BULFINCH GROUP

BY MARK BARON, CLTC

What are the main concernswith Long Term Care?

income you are counting on for a secure retirement. Most people count on retirement savings for their retirementdreams, family, and legacy, but not for long term care costs. Even if you haveenough money to pay for several years ofcare, your spouse could live on for severalyears with a reduced standard of living.Your children could bear the brunt of thecaregiving while trying to juggle things with their own families, and may live faraway. Long Term Care for one familymember could mean a terrible quality of life for the rest of the family.

Long term care insurance doesn’t have toreplace family, but it can help them providecare better and longer. The insurance canbe used exclusively, or just as a tool tosubsidize family members who have

other responsibilities. A healthy spouse can become ill trying to provide all the care. Most policies offer care coordinationservices to help put a plan of care together,find caregivers in the area, and oversee the process. You can’t underestimate the importance of this feature, because a care manager can make the entiredifference in how smoothly the process can work for a family.

Most of us will live a long life. Getting oldincreases the probability of becoming ill and needing care. There are also countlessthings that can go wrong before getting old that cause the need for long term care.When you need care, the consequences toyour family and friends can be devastating,especially if it drags on and on for manyyears….and you are on the hook for thecost of that care.

Unfortunately, there isn’t a solid systemwithin our government or health insuranceindustry that you can count on to pay forongoing care wherever you want to receiveit. If you want to stay in your own homeand receive daily ongoing long term careservices, it will likely come out of yourretirement savings. This usually means yourprincipal, which is meant to provide the

Understanding the insuranceLong term care insurance can be simple,if you look at the big picture. The bigpicture is that if you need care for 90 daysor more in two of six specifically-definedactivities of daily living, or, separately, justin the area of cognitive issues alone, suchas Alzheimer’s, you will qualify for benefits.The six main areas are: bathing, eating,dressing, transferring, toileting, andcontinence. If you are in poor health tostart with, qualifying for the insurancemight be difficult. However, conditions such as high blood pressure, beingoverweight, asthma, depression, and well-controlled diabetes are not automaticdisqualifiers.

How do the policies work? If you need care that satisfies the triggersabove, virtually all plans sold today willcover the cost of home care, adult day care,assisted living, and nursing homes. Theplans include an elimination period to be satisfied before expenses start gettingpaid, similar to a deductible. You canchoose how long that is, but shorter periods are more costly. There arevariations in how these work, including one option to not have any wait for home care, but only for facilities. This is a popular choice, since most people startoff with home care first.

� You can hire unskilled caregivers with theextra cash, to do simple tasks such asshop for groceries, or shovel snow; and

� You can pay a family member that islosing time at work to care for you, and

� You don’t have to save all the receipts.Just send one receipt for qualified carefor that day and the full benefit will besent; and

� Most reimbursement models won’tpay for both a private aide and anassisted living center at the sametime, but the extra cash will; and

� You can bank the extra money andsave it for a day when you havesignificant care needs.

Field Representative, The Guardian Life InsuranceCompany of America (Guardian), New York, NY. Lifeinsurance offered through The Bulfinch Group InsuranceAgency, LLC an affiliate of The Bulfinch Group, LLC. TheBulfinch Group, LLC is not licensed to sell insurance.

Reimbursement vs. Indemnity PlansMany plans offer the choice to be reimbursed for your expenses, or instead, pay you a setamount of cash, regardless of how much care you receive on a particular day. They are calledeither reimbursement or indemnity plans. There are a few different variations of thesemodels. Reimbursement plans do just that. They reimburse you for your actual expenses,up to your benefit limit. The indemnity models have appeal because even if you spend only$50 for care in a day, you will still receive the full daily benefit that your policy allows. So, ifyou had purchased a policy that will pay $200 per day, you will have received $150 extra.

The main reasons why indemnity plans can be attractive are the following:

How is a plan designed?There are many options, but let's consider the most important first.

The main choices are:

� Indemnity or reimbursement;

� Benefit amount – can be from $50 to $500/day, or $1,500 to$15,000/month;

� Benefit period – usually 3 yearsto unlimited lifetime;

� Inflation option – Benefit growth,usually 3% or 5% compound, and 5%simple/equal, but there are more choices;

� Elimination period – Deductibleperiod that you pay for your own care.Usually 90 days, but some other choices.

Once these decisions have been made, you are 95% of the way there. The next step is choosingthe correct company that fits your circumstances. That can be tricky. Once chosen, you are readyto look at any of their options that are of interest to you.

Indemnity plans typically cost between 12-20% more than reimbursement plans, dependingon the company. There is also a luxury version of indemnity, called “cash” plans, that willactually pay you the full benefits in cash on a monthly basis, even if you don’t show receiptsfor any care. These plans are significantly more costly than typical indemnity plans, however,they are popular with those who may plan to live overseas, or want complete flexibility.

How to decide what company is right?First, you should decide whether you likethe indemnity or the reimbursementmodel. The next step is to considercompanies that are rated significantlyhigher financially as a group, or are flexiblewith specific medical conditions you mayhave. Within that group of companies,you may find a solid plan that is bothcompetitively priced and covers your specific needs. Depending on yourparticular set of variables, one or twocompanies may become the obvious choice immediately.

These variables include marital status,age, and health. It’s important toconsult an expert in long term careinsurance to seek recommendations.There are many little pitfalls that a specialist can guide you through to help you identify the best choice.

If your financial planner, CPA, or lawyeris being included in this decision, they must also take the time to learn fromthe long term care specialist. It is verycommon for these professionals to chime in on this, without the properunderstanding.

Mark Baron, CLTC

Long Term Care Insurance Director

Office: (781) 292-3216

Cell: (617) 823-8334

Fax: (781) 634-0588

Email: mbaron@bulfinchgroup.com MAIN OFFICE:(781) 449-4402 � Kendrick Street � C-1 East � Needham, MA 02494

LOCATIONS THROUGHOUT NEW ENGLAND:Wakefield, MA � Rockland, MA � Westbrook, ME � Hampton Falls, NH

VISIT US AT: WWW.BULFINCHGROUP.COM