BY PATRICK JOHNSON
The basics of long term care (LTC) is the need for assistance or supervision with the six activities of daily living. These are eating, bathing, dressing, toileting, transferring and continence. There are many health-related issues that can play a role in the need for long term care: chronic illness, advanced age, accident, stroke, Alzheimer’s disease and other cognitive impairments.
Long term care policies cover home health care, including part-time skilled nursing services, physical therapy and respite care. They also provide care at a residential care facility, nursing facility and assisted living communities. Additional services would also include hospice care, medical equipment and home modifications.
The top reason one would buy a long term care plan is to allow your loved ones to care about you instead of caring for you. Also — to remain independent, to have a choice where to receive care and to avoid burdening loved ones with caregiving roles. The cost for home care in Sacramento, Calif. is around $28 to $32 dollars per hour. A one bedroom assisted living community starts around $4,500 per month.
Assisted living communities have many levels of care. Most have up to six levels, with some with up to nine levels. Each level up provides additional care and can cost $450 per month more. Up to a level nine could offer a registered nurse around the clock.
3 Types of Plans Offered
The three most common types of long term care products are the traditional pay as you go, hybrid Life/LTC combo products and universal life with a LTC rider.
1) The traditional plan is a cash flow sale: you pay a monthly premium based on the options you choose. This could include:
• The daily benefit amount
• Inflation options — usually are 3 and 5%
• 20-year option or life time option
• Length of coverage such as 2, 3, 4, 5, 6 years or unlimited.
Also in the calculation is the elimination period for a claim to start — usually 90 days. Some plans also offer a Zero Day elimination rider for home care. The age of the client and if single or married have an impact. Some plans do offer a couples discount.
2) The hybrid Life and LTC product combines a little life insurance protection on the back end if you never file a claim and die owning the policy and not using the LTC benefits. It also offers some sort of a return of premium. This is an asset sale.
- Most clients pay a single premium to lock in the coverage for life and it’s guaranteed not to change.
- Some carriers allow a 5 or 10 year pay plan as well.
- These plans work just like the traditional plans with the same features and benefits.
3) The last option is to purchase a larger life insurance plan and just add a LTC rider to the death benefit.
- These plans can be a fixed universal life plan or an indexed life insurance plan.
- The LTC rider could be 1, 2 or 4% of the death benefit and the coverage amount could last up to 25 months.
- A full 26% of all LTC cases written last year were ages 45 to 56 years old. This age group typically needs more life insurance coverage.
- These plans provide tax-free accumulation of cash value, tax-free distributions if needed, a tax-free death benefit if the insured dies and tax-free LTC benefits.
New features in California in 2021 include a new version of shared care in which the carrier just provides a third pool of equal benefits that can be shared by a couple in the event they exhaust their benefits. Also, this year you can pay a traditional plan with a 10 year pay or a single pay which would be guaranteed for life. A lifetime coverage benefit is also new to traditional products.
LTC Underwriting Today
You have to qualify for long term care coverage. That entails considering your current age, health, medications and current medical treatments. Carriers have pre-submission tools that can help clients know if they should move forward with the application process.
Items that can disqualify an applicant could be height and weight, certain medications and conditions such as Alzheimer’s disease, dementia, congestive heart failure, type 1 diabetes, oxygen use and Parkinson’s to name a few. All carriers provide agents with underwriting guides that list the conditions and medications. Other items that could make a client ineligible for coverage would be that they were previously declined for coverage, or that they currently require assistance with the activities of daily living, use a walker, wheelchair or are non-compliant with medications and treatments.
Some of today’s biggest medical concerns for the underwriters are depression, by-polar diagnosis, insulin dependence, diabetes, orthopedic problems, sleep apnea, cognitive dementia and memory loss, family history, obesity and circulatory issues and what is called co-morbid conditions — having more than one major medical issue.
Carriers offer a quick quote service where you can fill out a form or compose an email of the client’s medications and what they use them for and any other pertinent information for the underwriter to consider. Usually within a 24-hour period, you can get a thumbs up to move forward with the application or a thumbs down — which means a decline — or they may come back with additional questions. Most carriers offer a couple of underwriting classifications such as preferred, select, Class 1 or Class 2.
Based on the client’s age, usually a telephone appointment is all that is needed to qualify. At age 65 to 66, carriers require a live cognitive exam and will send out a registered nurse to visit with the client. Carriers usually order prescription drug checks and order medical records to complete the overall medical picture before an offer is made.
New 2021 Client Enhancements
For the first time ever, California has now approved a LTC traditional carrier with a single premium option. A client can now do a partial or full surrender via a 1035 tax-free exchange of a non-qualified annuity into long term care. This is HUGE!
Also, besides paper applications clients can now do an electronic application with their agent thru I-GO/E-APP and do it all online.
PRO TIP: Make sure that your will and trust are up to date and that you have current California long-term care directive, power of attorney for health care and power of attorney for finances.
PATRICK ‘PJ’ JOHNSON is an independent life insurance agent and also does sales and marketing for Cal Pacific South out of the Sacramento office. PJ has been a NAIFA member since 1984 and currently serves on the board of directors for the Greater East Bay Chapter. He is also a past board member of the FPA Sacramento Chapter. He has CLU and CLTC designations and can be reached at: pj@cpssac.com or 925-200-9482.