The Alzheimer’s Association recently held two Legal and Financial Planning educational programs for those who have a family member affected Alzheimer’s disease or dementia. It was my privilege to be the presenter for the Financial portion of the workshop and share about resources that can help pay for or reduce the cost of memory care.
Brad speaks to UCSB Emeriti and Retirees regarding Long-Term Care Planning
Brad spoke to retired UCSB faculty and staff about planning for care in the long-term. The presentation addressed the cost of custodial care, what resources pay for care, and the various long-term care insurance options available today.
Audience comments after the presentation included the following:
“Very informative and enlightening. There are so many options I was not aware of”
“Very helpful update on long-term care funding alternatives”
“Stayed on subject as advertised, very knowledgeable”
“Very important choice for emeriti and retiree presentation”
Click here for presentation: LTC for UCSB Emeriti
Tips for a Family Discussion About Long-Term Care
In light of November being long-term-care awareness month I thought I would weigh in briefly with some statistics on aging and the impact of care giving. I also wanted to provide some questions to help guide a family discussion about long-term care planning.
Although we may not talk about it much, there is a ripple effect that long-term-care has on families, friends, communities and beyond. Here are some telling numbers about aging and long-term care.
The cost of providing care for someone at home or in a facility such as assisted living has increased each year, and the issue of long-term care is not going away when you consider that people are living longer.
- Of those age 65 today, 1 in 4 will live past age 90
- And of those 65 today, 1 in 10 will live past age 95
- Almost 70% of those over 65 will need care services and support
In 2014 over $725 Billion was spent on long-term care in the United States.
- Over 70% ($513 Billion) was unpaid family caregiving and direct out of pocket costs
- About 10% ($7 Billion) was private long-term care insurance
These numbers will rise as people age and the cost of care continues to increase. In 2017 the cost of care is 4.5% higher than it was in 2016.
Given this reality, there a couple questions to ponder. Is it probable that you will live a relatively long life? If so, is it possible that at some point you will become frail and need care over a number of years? What would providing care look like financially, physically and emotionally to your family and loved ones? What is your plan?
As families gather during the holidays it could be an opportune time to address the issue long-term care planning. Key questions for this discussion include:
- Where would you like to receive care?
- Who do you want to provide that care?
- Who will coordinate the various care services?
- What financial resources are readily available to pay for care?
- Should long-term care insurance be a part of your plan?
I realize this may not be the most fun conversation to have, but it is better to have it sooner rather than later especially for Baby Boomers and those with aging parents. As with all contingency plans it allows you to better control an event such as long-term care as opposed to having that event control you.
- The Scan Foundation, March 2014
- Social Security Administration, 2017
- US Department of Health and Human Services, February, 2017
- Genworth Cost of Care Survey, September, 2017
Will your annuity pay for long-term care?
In the insurance industry, the month of May is disability awareness month. Although a busy May, 2017 has come to an end, I still want to comment on the importance of disability insurance and share some thoughts…
Disability Income Insurance is critical protection to have during one’s working years but it is often overlooked. People insure their homes, cars and other valuables in order to replace those things if something happens. But have they insured their greatest asset which is their ability to work and earn and income? Income drives everything in our financial lives; it supports our lifestyles, needs, wants and commitments, and income allows us to save for retirement.
Most people can name at least one person who has become temporarily or permanently disabled. I personally know what it is like to be diagnosed with an illness out of the blue and be too sick to work full time. It may never happen to you, but what would the financial, physical and emotional consequences be to you and your family if you had an accident, illness or injury that prevented you from earning an income?
- What changes would you have to make to your current lifestyle?
- What would be the source of your monthly cash?
I won’t get into the specifics of disability insurance policies and benefits, but here are some general suggestions…
- If you’re an employee, check to see if your company offers group disability insurance and that you are participating in it.
- If you are an executive or a high income earner, the group disability benefits at your company may not replace enough of your income, so consider individual (or supplemental) policy to cover the gap.
- If you are a sole proprietor you are not eligible any state disability benefits in CA, so protect yourself and family with an individual disability policy.
- If you have a business or practice where you provide services to clients or patients, also consider a Disability Overhead Expense policy to keep your business open and operating while you are out with a disability. This gives you a business to come back to without having to completely rebuild.
- If you are a co-owner or partner in a business, do you have Disability Buy-Out insurance as part of your buy-sell agreement?
- If you are working past age 65 to fund your retirement, your existing disability coverage may end or be reduced at age 65. However, you can acquire a new disability policy to cover the gap between ages 65 and 70.
Statistically speaking 1 in 3 Americans between the ages of 35 and 65 will become disabled for more than 90 days. The average long-term disability claims lasts 31.2 months and the majority of disability claims are based on an illness rather than an accidents. A disability policy won’t prevent you from becoming disabled, but it will mitigate the financial hardship of a short term or long term disability.
Insuring Those with Diabetes
How underwriters of life, disability and long-term care consider Type I and Type II diabetes
In my practice I help people protect their family, finances and lifestyle with the strategic use of life, disability and long-term care insurance. Frequently I am asked whether someone with Type 1 or Type 2 diabetes can health qualify for these types of policies and how diabetes is evaluated by the insurance companies.
Someone with diabetes can qualify for insurance, but successfully underwriting the condition is based on a number of considerations. First is the type of insurance and how a particular company considers diabetes, some carriers may be more liberal than others with this condition. Second are the type of diabetes and the date of onset. And finally how the diabetes is being treated, the level of control and what other health issues the applicant may have.
Whether or not someone with diabetes is approved for insurance would be based on an evaluation of their individual application, medical records and lab results. However, here are some general guidelines as to how Type 2 and Type 1 diabetes may be underwritten for life, individual disability and long-term care insurance.
Type 2: A policy could be approved with as high as a “standard” (normal) health rating as long as diabetes is not a new diagnosis and it is well controlled with diet, exercise and oral medication.
Type 1: This is also an insurable condition, however a policy would be rated 4 to 6 tables. Being rated means that insured would pay a higher premium to offset the risk for a condition that could result in a reduced life expectancy. Glucose and A1C must be within normal limits and stability is key. If the diabetes is not under control it would be a decline.
Individual Disability Insurance:
Type 2: If well controlled, Type 2 diabetes can be approved with most carries. A policy would be capped with a 5 year benefit period, and there would be a 30% to 50% additional premium charge.
Type 1: This is more difficult to underwrite. There is one carrier in the market that would consider an applicant if age of onset is 25 or later and proposed insured takes no more than 40 units of insulin daily. The diabetes must be under control with no other medical issues. There would be an extra premium of 50% to 75% depending on the applicant’s age.
In most cases, Type 1/Juvenile Diabetics and those taking insulin should look for disability coverage with a carrier that specializes in sub-standard health or high occupational risk. These policies would also have a 5 year benefit period.
Long-Term Care Insurance
Long-term care insurance policies fall into two categories. One is the standalone, premium based policies that have been around for years. The other is life insurance and annuity policies with long-term care benefits built in or added as a rider, these are called linked benefit or hybrid policies.
Type 2: This can be an insurable condition with most carriers for standalone and hybrid policies. Oral medication is acceptable and the diabetes must be well controlled. The applicant must have no other serious conditions such as heart disease, peripheral vascular disease, amputation, retinopathy, kidney disease or stroke. There can be no tobacco use in the last 5 years.
Type 1 or insulin use: This is not an insurable condition for standalone policies on an individual basis. Through their employer however, as part of an employer sponsored LTC plan with simplified (minimal) underwriting, someone with Type 1 may be able to qualify for coverage. And, there is at least one linked benefit carrier that will issue long-term care coverage to someone with Type 1. Approval would be based on how well the diabetes is controlled with insulin, diet and exercise, and if there are no other co-morbid conditions.
When applying for an individual life, disability or long-term care insurance, it is important to work with an agent who can do preliminary underwriting and shop the market and on your behalf. This means talking with the underwriting departments of multiple insurance companies prior to submitting your formal application. This will increase the likelihood of a policy being issued with the best pricing for your situation.