In the next few minutes you will learn about a new insurance industry product that provides long term care insurance coverage if you ever need it, but requires no policy, premiums or health qualifications.
Why Seniors Don't Buy Long Term Care
1. In my experience, over half the people who shun long term care insurance do so because they feel they will never need it. It is difficult to visualize going to a nursing home. Statistically, half of these people will be right.
However, there are a number of scenarios where the person may need some kind of assistance but never see the front door of a nursing home. In fact, most people who need long term care can receive care without ever leaving their home.
When you stop and think about it, the decision not to buy long term care insurance is a decision to self insure. This can be costly and possibly devastating.
The average cost of a nursing home today is $80,000 per year and rising. At that rate, it doesn't take but a few years to grind through a modest estate. If both the husband and wife need nursing home care, the time to dissipate an estate is cut in half.
A person can spend 40 years in a career building a retirement nest egg. They spend another 40+ years conservatively managing their money while trying to keep up with inflation. If they need to go into a nursing home during the last five years of their life, it all could be gone quickly.
It doesn't have to be that way as you will soon see.
2. Many people think long term care insurance is too expensive. They may be right.
If a person waits too long to apply, they may have sticker shock. The rates are based on age.
However, long term care comes with a lot of bells and whistles. When you strip away some of the options that may be nice to have, but not essential, the premium is a lot lower.
If a person looks at a plan that covers home health care only, the premium is lower yet. This takes care of the 50% who never will need to go into a nursing home.
The only thing better is coverage without a premium, which I will get to in a minute.
3. Most people react to a problem only when the problem surfaces. If a person waits to apply for long term care insurance until they are experiencing health problems, any long term care insurance plan may be prohibitively expensive or altogether unavailable.
The Solution: The Long Term Care Insurance That is Not a Policy
The insurance industry is very competitive. This very competition engenders new thinking and creative policies. Enter "Long Term Care Annuities."
There are only a few companies offering this product and the structure differs from company to company. To give you a general overview of the concept and mechanics, I am going to describe the main aspects of one carrier's contract. Check with your financial planner for all the options.
The underlying base of an "LTC annuity" is an annuity. Nothing new here; annuities have been around for a hundred years. They are safe, the funds accrue at a competitive interest rate, and the account grows tax-deferred.
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