Inflation Protection or Bigger Daily Benefit

[Superchief]

I have a 68 year old in great health that wants LTC for peace of mind.

Likes the idea of a lifetime benefit versus 4 or 5 years.
Financially stable enough to handle a 90 day elimination period.

But what's better?

A lower daily benefit with inflation protection or a higher daily benefit with no inflation protection?

Cost wise I can get her a higher daily benefit up front for less than lower benefit with inflation protection.

According to much of the stats online...

The average age for a female in a nursing home is 83. The current average cost of nursing home in Texas is about $150 per day, maybe less. In 15 years if inflation is perfect it should cost about $215 or more per day. $150/day with 5% simple would give her right at $215 in 15 years, but my quote is $4500 annually.

$220/day with GPO would be $3800.

Opinions? Recommendations?

 

[Winter_123]

I have a 68 year old in great health that wants LTC for peace of mind.

Likes the idea of a lifetime benefit versus 4 or 5 years.
Financially stable enough to handle a 90 day elimination period.

But what's better?

A lower daily benefit with inflation protection or a higher daily benefit with no inflation protection?

Cost wise I can get her a higher daily benefit up front for less than lower benefit with inflation protection.

According to much of the stats online...

The average age for a female in a nursing home is 83. The current average cost of nursing home in Texas is about $150 per day, maybe less. In 15 years if inflation is perfect it should cost about $215 or more per day. $150/day with 5% simple would give her right at $215 in 15 years, but my quote is $4500 annually.

$220/day with GPO would be $3800.

Opinions? Recommendations?

Ask your carrier such as Genworth what the cost per day is for your state. $150 sounds low.

None of us has a crystal ball but I would be more inclined to propose a plan that starts at current rates and has inflation protection. To hold costs down, if that is a factor, I would look at a 4 year plan. Keep in mind that a good long term care plan is not just a nursing home plan so you cant totally compare to nursing home rates or to average age of entering a nursing home plan.

Winter

 

[Superchief]

Yeah, I'm trying to persuade her on a four year plan, but she is dead set on lifetime. Her family history is pretty clean - no alzheimers, parkinsons or cippling arthritis. So I figure a lifetime plan is overkill.

Everything I could find research wise said Texas nursing home costs are at $55000 per year on average. $45000 for in home care. Math it out to get $150/day.

 

[Winter_123]

Yeah, I'm trying to persuade her on a four year plan, but she is dead set on lifetime. Her family history is pretty clean - no alzheimers, parkinsons or cippling arthritis. So I figure a lifetime plan is overkill.

Everything I could find research wise said Texas nursing home costs are at $55000 per year on average. $45000 for in home care. Math it out to get $150/day.

It is not so much overkill as it is a matter of affordability. If they can afford it fine. Otherwise which would you want, a four year plan that with a daily benefit that covers everything, mostly, or a lifetime plan with a small benefit which you only use for a couple years but still end out paying out of pocket. None of us have a crystal ball but the data puts the odds closer to using it for less than 4 years, closer to 2.5 years if you have to use a nursing home.

The other important thing to consider is that the daily benefit with most plans is just a way of calculating a benefit sum that is available to you for your lifetime provided that you do not draw it down more than the daily benefit amount each day. In other words a 4-yr plan is 219,000 of benefit available that you might use over a ten year period for example. If you used the entire 4-year plan on intermittent home health care it could be a lifetime plan. Or if you used the 4-year plan on an assisted living facility rather than a nursing home then that might be more like six years of care. A good plan is not just a nursing home plan.

Winter

 

[James]

Warning, insurance agents should really stop looking at statistics they don't understand! They should not make decisions of "Overkill" when selling LTCi.

First off, the stats on Nursing homes. Sure, the stats might say 2.5 years average stay but that is counting all repeat "ALL" admissions. Those include younger people in Rehab. If you look at the older segment going into nursing homes alone that shows something a tad different. If you look at those that go into nursing homes at older ages usually associated with Alzhiemers, Dementia or what have you your stay jumps up to 7-9 years or for the rest of their lives.

As for Overkill? You shouldn't be selling LTCi if that is your attitude about this kind of insurance. LTCi is nothing more then Risk transference, one should only look at affordability. If a person can afford a lifetime plan they should buy into it without question.

Everything I could find research wise said Texas nursing home costs are at $55000 per year on average. $45000 for in home care. Math it out to get $150/day.

This just isn't accurate at all. First off you have to understand levels of care. No way is 24 hour care cheaper at home than in a Nursing Home, just doesn't compute. Go back and do more research. Average Nursing Home per year in TN is around 65 grand a year, I know TX isn't coming in no cheaper. If a person needs more than 12 hour of custodial care plus a nurse for so many hours a day the cost at that point is greater than a NH no matter where you live.

 

[bluemarlin08]

Call the local nursing home, AL and HC agencies and ask what they charge. Put the rates on paper for each facility. I do this and use the paper often to show prospects.

 

[Frank Stastny]

It is not so much overkill as it is a matter of affordability.

Winter

It's been several years since I actively sold LTC but I still ask my senior clients if they have a policy. A lot of them think they have coverage until they show me the policy. I am always amazed at what some agents sell them.

I have seen tons of policies that will pay $50 or $60 dollars a day with a 120 day elimination period. When I ask them why they took such a small amount of coverage and long elimination period, they usually respond with, "That's all we could afford".

These are people who neither have a pot or a window to throw it out of. When I ask them how they are going to pay during the elimination period and where the other $100 per day is going to come from if they have to go into a nursing home, they give me a blank stare.

When they ask me what to do, I tell them to cancel it and spend that premium money to buy a better brand of cat food or spend it on the meds that their doctor says they need to take that they never purchase because they don't have the money.

I know that is a little off topic and not really what you were referring to when you said affordability. It is just something that really bothers me.

There, now I feel better. LOL

 

[James]

It's been several years since I actively sold LTC but I still ask my senior clients if they have a policy. A lot of them think they have coverage until they show me the policy. I am always amazed at what some agents sell them.

I have seen tons of policies that will pay $50 or $60 dollars a day with a 120 day elimination period. When I ask them why they took such a small amount of coverage and long elimination period, they usually respond with, "That's all we could afford".

These are people who neither have a pot or a window to throw it out of. When I ask them how they are going to pay during the elimination period and where the other $100 per day is going to come from if they have to go into a nursing home, they give me a blank stare.

When they ask me what to do, I tell them to cancel it and spend that premium money to buy a better brand of cat food or spend it on the meds that their doctor says they need to take that they never purchase because they don't have the money.

I know that is a little off topic and not really what you were referring to when you said affordability. It is just something that really bothers me.

There, now I feel better. LOL

Yet though, for those people you have to look at family care. If that is present since most LTC will involve Custodial Care these small benefit plans can be very useful.

 

[Frank Stastny]

Yet though, for those people you have to look at family care. If that is present since most LTC will involve Custodial Care these small benefit plans can be very useful.

They can but only if the company does not require a licensed professional to provide the care.

Are there a lot of companies that will now pay a non licensed family member to provide care?

 

[James]

They can but only if the company does not require a licensed professional to provide the care.

Are there a lot of companies that will now pay a non licensed family member to provide care?

More and more companies are offering a wider range of benefits and custodial care is on the top of the list. Obviously since any study of LTC includes custodial care as the number one concern. Yet though, most seniors that need LTC that the family will provide majority of the care, they'll still need XX amount of hours of professional custodial help simply to help out. Something that I just went thru and still going thru with my wife's grandparents, the grandfather passed away last month after 5 years of serious failing health, yet now we are facing Grandma that can linger on for years with Alzhiemers. Yet though while she has a great support system (family) there is no LTCi in placed.

Now I'm at the point of pretty much F-U to my wife's mother and family that refused any attempt to set up outside help (obviously inheritence has a great deal to do with this, there is money to fund it), basically my wife and myself are basically supplying 40% of the labor and cost yet we don't have the inheritence that her mother, aunt and uncle are expecting their way. Now obviously they say that they can give better care, yet that is very dubious on the face of that claim which makes me very skeptical at best. Been thru this before with my side of the family, yet we handle it differently, we called in outside help and yes paid for it.

Most do not understand the time, cost and stress involved in LTC (the custodial side which is the bulk of it) and more than one family have ended in ruin, something that I now can see is likely end of my family. I curse my wife's family, we talk about this and they simply didn't/don't care or in complete denial, it is to the point I will not eat with them or in any manner communicate with them. The last week of my wife's grandfather was good for him, he got to say goodbye to many, I just couldn't participate and obviously this is causing some reaction/pain within my family. Even my wife is now feeling the stress being cause by those that say they can perform but in reality they don't have the ability to spend the time required to do so, mainly they are facing health issues are just too greedy with their time.

Now a small LTCi policy that would of paid for 8 hours a day of professional custodial help would of greatly helped! Any stress you can take off of the family esp. the stress between the spouses such as children and grandchildren that are the caregivers can easily make a very big difference.