Long Term Care Insurance
My company is offering Long Term Care Insurance as a new benefit. It’s really a group rate through Prudential and my company isn’t actually contributing any funds to the benefit.
Prudential is offering Daily Benefit Amounts from $100 through $250 a day, meaning if I am in need of long-term care, they will pay up to the Daily Benefit Amount I choose. If I enroll by a certain date, I will not have to get medical certification. Any others I add, such as my spouse, parents, parents-in-law, children, etc, will have to receive medical certification of well-being. Anyone can enroll at any time, but after Friday, I would have to get medical certification.
Not that many people were in the open enrollment sessions discussing this benefit, but you could definitely tell who was serious about this by the questions that were asked. Keep in mind all of these answers are based on my company’s policy.
Can you take the policy with you if you leave the company? Yes, you would receive a bill from Prudential directly.
Can I cancel? Yes, you can cancel at any time.
How long is the coverage for? It’s for 3 years of LTC coverage x your maximum daily benefit. So if you opt for the $100 of daily benefit: $100 x 12 x 3 = $3600. If you only use half of your daily benefit, your coverage will last for 6 years.
What if you use your coverage up early and are released from LTC? Can you use it again? If you use up your total benefit amount (in the example above, $3600) and are then well enough to no longer qualify for long-term care, you can resume paying your monthly premiums and after 6 months, you will be eligible for another $3600 of LTC coverage.
What do you have to do to qualify for coverage? Not be able to do 2 of the following 6 key activities of daily living for a minimum of 90 days: bathing, toileting, dressing, eating, continence, and mobility with cognitive impairment thrown in as a seventh way to qualify. If an accident caused your incapacity, then a doctor can easily specify a date to begin your 90 days. Otherwise, it would be best to get a diagnosis as quickly as possible so that your 90 days goes into effect right away because coverage does not start until after 90 days pass.
What happens if I miss a bill? A secondary person can be set up so if you miss two months in a row, your secondary billing contact would receive this bill. This was thought of because of the potential for dementia and other mental incapacities that come along typically with age.
What about inflation and increases in LTC costs? Every 3 years, an option for an inflation adjustment will be presented to increase the daily benefit. Premiums would increase a little with each accepted inflation adjustment. If you reject two inflation adjustments in a row, but you accept one after that, the insured must get medical certification of well-being before he or she can accept the inflation adjustment. Basically, if you want inflation adjustments at all, you need to accept at least every other one to avoid medical certification or re-certification. Prudential will not drop you, though, for not accepting them, nor will you be dropped if you don’t pass the medical certification for an inflation adjustment.
Another inflation option is where you start out at a much higher premium, usually the premium at age 65 and you will automatically receive all inflation adjustments with no change in premium.
What if a spouse or relative is taking care of me? Usually, this is a less expensive method of care. You can either ask for reimbursements based on medical expenses up to your daily maximum of coverage or you can opt for a cash value of your policy monthly valued at 1/2 of your daily maximum. If you opt for half of the cash value of the policy monthly, your TLC total coverage value will last twice as long or up to 6 years.
Are any discounts available? If you are married, there is a 10% premium discount because, typically, a married individual will wait longer before utilizing the TLC insurance benefit. Also, if you are paying Prudential directly (e.g. not through payroll deductions like the employee would be doing it through a group plan at work), then you are eligible for prepayment discounts if you pay your annual premium up front.
SmartMoney has some info on Long Term Care Insurance that might be worth a look: http://www.smartmoney.com/insurance/longtermcare/
Getting in early seems to be the best option for LTC coverage. I’m going to be paying about $21 a month for a $250 Daily Benefit Amount. If I chose the $100 Daily Benefit, I’d be paying about $9 a month. I’m now 32. If I had waited until 40, I’d be paying $42 a month. Others in my company who are older than I am are looking at costs upwards of $100 a month! Wow.
If I find a better offer elsewhere, I can sign up for the new policy and after approval, I can cancel my current one. I priced out State Farm for my age and they were twice as much. One of my coworkers who is older, however, priced them out and for his age, they were significantly less expensive so it’s definitely worth looking around a little. From what I’ve seen, State Farm and Prudential are the largest LTC insurance providers so they seem to be good place to start.
LTC is one of those things that you hope you never need, but if you’ve ever had someone in your life who was unfortunate enough to not be able to take care of themselves, you realize how important this could be.
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December 27th, 2007 at 7:20 pm
Please correct my math if it is wrong. If you work until age 65, it would be $21/mo. x 12 mos./yr x 33 yrs =$8316.00 paid in. Using the above formula $250 DBA x 12 x 3 yrs = $9000 in LTD. It almost seems that you would get a better return for taking you $21/mo and investing it in a money market or putting it into a savings acct. Or is my math on this completely wrong?
December 27th, 2007 at 11:00 pm
$250 a day benefit x 30 days a month x 12 months a year x 3 years = $270k.
The number looks big now, but all of the calculations during the presentation were using the $100/day benefit so I just need to adjust my perspective a little.
I have 30 days after the start to get my $21 back.
Also, if I find a better deal, I can cancel at any time.
Just like any insurance, it’s only insurance against bad stuff. There’s a chance I might never use it, much less use it at 65. I think it’s something that one considers after seeing a parent who needed to be taken care of for many years before finally passing away, like I did.
December 31st, 2007 at 12:02 pm
Aha!! I knew my math stunk!