Facts About Starting LTC Insurance

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The acronym LTC, in insurance terminology, stands for "long term care." Get facts about starting LTC insurance with help from a licensed insurance agent in this free video clip.

Part of the Video Series: Insurance & Finances
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Video Transcript

Hi, I'm Jonathan DeYoe with DeYoe Wealth Management in Berkley, California, and today we're going to talk about the facts of starting long term care insurance. Now for most folks long term care insurance means nursing home care insurance, something that helps you pay for your care when you go into a nursing home, but what it really is is it's an insurance that helps you pay for in-home care or nursing home care at any point in your life when you are as young as 30 years old, 35 years old, even when you are 90, for when you can't do two out of six activities of daily living. Now in a financial planning process we discover two different uses for long term care insurance. The first is the obvious one, to help somebody pay for long term care when they may not have the assets or the income to do so. The second is a little bit more interesting at times and that's to protect one's assets for one's heirs and the way this works is if you have not enough money there are state programs that will pay for you but in order to qualify for them you have to spend every penny down to your last $2000. So there are, if you have long term care insurance, this can provide support, nursing home or at-home care and protect those assets for your children or your favorite charities. There are two types of long term care insurance. When asked, most people would prefer that the care that they receive long term would happen in their homes but not all policies cover this. The two types are in-home care and we'll call it institutionalized care. Many people need the additional care and support that's available inside a home. This is the nursing home, but some people early on when they are receiving care might rather receive it in their home. So make sure you ask the question when you are talking to a long-term care insurance salesperson. There are four sets of details that are very important when you think about your long-term care insurance policy. Most obviously is your daily benefit. In California I think the average is $225 a day is what it costs for nursing home care. So you can pay for a greater benefit, maybe $250 or you can save some money and pay for $150. You can get as low as $100 and that makes a difference to protecting your assets and to covering care. The second method or the second issue that you're going to face is how much or how long of a waiting period do you want to have before your insurance takes effect. In other words, how long do you want to have to pay for care out of your pocket before your insurance takes over and often times this takes 30 days, 60 days or 90 days. Obviously the longer the waiting period, the lower the insurance cost might be. The third issue is one of inflation protection and there's two types of inflation protection. One could have simple inflation protection in which case you get 5% simple interest. Let's explain what that means. If you have $100 daily benefit in the first year and you have 5% simple interest inflation protection, your second year will be $105, your third year will be $110, your fourth year would be $115, going like that, adding $5 every year that you hold the policy. The third, excuse me, the other option is the 5% compound in which case you actually have an increased benefit based on interest on the interest. So your first year would be $100, second would be $105, but rather than go to $110 it would go to $105 and change and then $110 and change and then $115, maybe $116, so you can see where it increases faster with a compound benefit for inflation protection. The final option for coverage you have is the time frame for receiving benefits. Most policies have, will cover your nursing home care or your in-home care for two years, three years, five years or a lifetime. Obviously the more time you have coverage, the more expensive that insurance will be. Now it's really important to realize that usually when folks are buying long-term care insurance, they're buying it for a benefit that doesn't come to them for 15 or 20 years in the future. Because of this you want to make sure you buy it from a company that is extremely strong, so you know that they're going to be here when you need the care. I'm Jonathan DeYoe with DeYoe Wealth Management in Berkley, California. Thanks for listening.

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