Thursday, May 29, 2014

Long Term Care Considerations

In a previous blog found HERE, we discussed  general  guidelines  of planning for long term care.  We will now discuss further considerations in this blog.

Cost of Care

The majority of individuals provide for long term care through insurance.  The cost for those policies has been changing (increasing premiums or reducing benefits) over the past few years.  For example:

  1. Women frequently pay more because of their longer life expectancies and more expensive claim history.
  2. Age at the time long-term care begins also affects policy costs:  the younger the applicant, the lower the policy premium. Determining when to purchase a policy requires a cost/benefit analysis.  The younger you are, the longer you pay premiums but at a lesser premium rate.
Eligibility Requirements
 
A study by the American Association of Long Term Care Insurance (see Kiplinger Retirement Report, Vol 21, number 3, March 2014) showed that insurance rejection rates of policy applicants) factored in both age and medical conditions.  Twelve percent of applicants below age 50 were rejected.  The rejection rate rose to 17% for those age 50-59; 25% for those age 60-69; and 44% for applicants in their seventies.
 
Gate Keepers
 
When evaluating long term care policies, one should carefully analyze the “gatekeepers.”  These are the provisions which must be met before the policy will pay benefits.  Analyzing their provisions for benefit payment s is critical and should be done for your individual circumstances.
 
How To Pay
 
Some recent changes have been made that may allow an applicant to pay long term care premiums more “efficiently.”  Premiums can be paid with tax-free rollovers from cash value life insurance policies or deferred annuities.
 
You can also use money tax free from a health savings account.  Since contributions to such accounts are limited (based on individual age), these plans will cover only a portion of the insurance policy cost.
 
Paragon Financial Advisors does not sell insurance or any products.  On the other hand, we do assist our clients in planning for the cost of long term care.  Please call us if you would like to schedule an appointment to discuss your circumstances.  Paragon Financial Advisors is a fee-only registered investment advisory company located in College Station, Texas. We offer financialplanning and investmentmanagement.
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