Why Do People Reject Long Term Care Insurance?

I have been involved with long term care insurance for well over a decade, and over the last five years, I have considered myself a long term care insurance specialist. In order to do the job of insuring individuals and families against the threat of chronic care needs, an agent must be dedicated to this purpose. Offering life insurance, disability or health insurance only dilutes what should be a concentrated effort to ensure that families have the proper amount of long term care insurance. In addition, an insurance agent must know how to navigate through the tremendous diversity of health conditions that clients present prior to applying because without the client's application obtaining approval, all efforts are in vain.

Whether a potential client has been approved or never makes it to the point of applying for a policy, individuals and couples reject this insurance for the wrong reasons. The most unfortunate reason I have uncovered in my experience is simple denial. People do not want to believe that their vitality will eventually diminish. A person will convince themselves that they will either die in their sleep or drop dead from a heart attack. I have trouble empathizing with this position because it only takes a few minutes of thought to consider how needing chronic care will affect friends and family. When an individual or couple decide against insurance, they should ask the following questions: Who will care for me? Who will coordinate my care? How long can I afford $75,000 per year? If my family handles the scheduling of my care, who will train them to do this? How much will that cost? Will they have to leave their job(s) to do this? Can they afford to lose their job(s) if I become their responsibility? Will my friends and family still have to manage my finances? Will I be a burden to my family? Will my spouse have to go back to work if I need care longer than our savings will last? Will there be financial security for my spouse or family after I am gone?

Is the safe spot of denial worth the expense of every one around you? Of course not. Leave denial at the door, and clear your head to make a rational decision for or against LTC insurance.

As expected, there are other reasons people reject LTC insurance, and the second most common reason is the cost of the insurance. There is a simple test you can do to determine if you are a good fit financially for long term care insurance. If you own your home outright and your savings and investments are over $70,000 then you should consider the insurance. Look at the return you make every year on your savings. Is the interest you have earned greater than the cost of the plan quoted to you by your LTC specialist? Do you live off of this interest? Bottom line, if you can pay your insurance premiums with the interest on your savings then you can afford the insurance, but there is more to this analysis. The benefits must be in line with your personal finances, and determining benefit levels is why you want an LTC Specialist. Since average long term care insurance premiums range from $900 to $3500 per year, just asking how much it costs isn't going to give you the information you need. An agent that dabbles in this field may offer you a plan that leads you to believe it is too expensive, even using the formula proposed above, or an ethically challenged agent may under-insure you because they do not want to scare you away with a premium that they believe you will find to be too high.

The middle ground can be found with a plan designed to cover the cost of a semi-private room in a local nursing home. If you need chronic care, you may receive home care or care in an assisted living apartment and never see the inside of a nursing home, but, typically, a nursing home stay is the most expensive scenario with the exception of extensive home care or round the clock home care. If your insurance covers or nearly covers this worst case scenario, you will have an appropriate level of coverage. After you and your specialist decide on your level of coverage, it will be time to evaluate the affordability of the annual premium. You will know if it is affordable or not. If the premium eats away your principal savings and cannot be paid with the interest you earn each year from your savings then perhaps the insurance is not right for you. In this case, if you need long term care, you would spend down your estate to near zero and apply for Medicaid, or medical welfare.

In going through this process, make sure to find a specialist in long term care insurance. Financial planners are not long term care specialists. To check a financial planner's or agent's experience level just ask them which LTC insurance company will offer coverage to someone who has a diagnosis of Bipolar Disorder. Or, how are autoimmune conditions treated by these companies? Do they know what autoimmune means? Any licensed agent or financial planner can submit an application for a client, but how many specialize in making sure an application comes back as an insurance policy without a large increase in the premiums? This is the job of a long term care insurance specialist. The specialist knows the best companies for each medical condition and the right fit for the specific needs of the client. A client who will retire overseas should apply for a cash only plan or indemnity plan. There are many scenarios where dabblers and stockbrokers can make mistakes that you cannot afford when your family's well-being is at stake.

While investigating your long term care options, give your specialist a chance to help you uncover any reasons that may prevent you from making the right choice. A true specialist is not trying to "sell" you, and this will be apparent to you. The two main reasons individuals and couples reject long term care insurance are denial and cost. Open your self up to exploring the consequences of being in denial or misjudging if you can really afford this insurance. You may become uncomfortable discussing your mortality, but by doing this, you may end up saving the people you love from exhaustion and heartache.

I thought about leaving this next point out of this article because it seems too obvious, but it should still be addressed. Forgive me if the following statement is insulting. Insurance is not free. What I mean by this flippant sounding statement is that we do not receive a refund at the end of our lives for having paid all those years of car insurance, and the same is true for home owner's insurance, disability, health or an expired life insurance policy where upon it's expiration we are still drawing breath. The same is true for long term care insurance. If you are one of the lucky individuals who never uses their long term care insurance policy, you will not receive a refund of your premiums.* This is not a new idea to any of us, but it is worth a mention. If you say no to LTC insurance because you will not get your premiums back when you die, then consider the possibility that your reason for rejection is based on denial because insurance has never been free.

One last point, if you are married and you both apply for long term care insurance, but one of you is not approved for coverage, do not make a knee jerk reaction out of anger or frustration to decide that neither of you should have the insurance. Instead, after learning the news, let the emotions cool off for a few days, and then visit with your specialist to decide the best course of action.

* A return of premium rider is available on most plans at an extra cost. Some plans do return the premium if the policyholder dies prior to attaining a predetermined age.

Who Should Buy Long Term Care Insurance?

For many people, they have yet to hear of long term care insurance. Many think immediately of long term disability insurance upon the first mention of ltc insurance, but it is not even close to being the same type of insurance product.

Long term care insurance pays for caregiving, and disability insurance replaces a portion of income. These are two distinct functions. Since disability insurance will typically replace 50%, 60% or 66% of your income, this leaves less money to cover bills that already existed before a person even considers who they will pay for a necessary caregiver.

A caregiver becomes necessary if you are unable to accomplish your activities of daily living. Most people need a caregiver or multiple caregivers if they cannot accomplish two of the recognized activities of daily living. These activities are eating, dressing, bathing, toileting, continence, and transferring (moving from point A to point B unassisted). In some states a seventh activity of daily living is recognized, ambulation and mobility. When a person is unable to do two of these activities without help, if they have long term care insurance, it will begin to pay for a portion or all of the care giving depending on their chosen benefits at the time of application.

So, long term care insurance pays for the caregivers. Disability pays for the household bills. Well, the question now can be asked, who needs long term care insurance? Everybody. It is not just something we should consider when we start to find Bingo incredibly entertaining. Almost 40% of Medicaid recipients using long term care are under the age of 60 years old. Any of us could need care at any time. Young people are diagnosed at an alarming rate with chronic illnesses such as MS or Lupus. We just cannot tell the future.

Some people reading this may think that they should not buy long term care insurance because they can afford care indefinitely. That is a strong argument against buying insurance until you discover that your checkbook cannot make phone calls and schedule five different types of care per week while monitoring how caregivers are performing and treating you. This burden would still fall on your kids, family or close friends. This is a burden. Even if you contracted out for those services by spending more money, you still need to have an entire strategy or plan written out for your kids or family to implement because you may have trouble communicating if you need long term care. Besides, long term care insurance is most affordable to those with larger amounts of savings. Spending $100 to $500 per month for insurance (depending on your age, benefits and health) is better than spending $4000 to $8000 per month for care out of your own pocket. Our long term care insurance site explains how the nuts and bolts of the this insurance works, and if you have less than a certain amount of savings, it may not be right for you. Bottom line, everyone should know about it and investigate it. It is too costly to remain in the dark.