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Long-term care insurance about to set fees by gender

Sun-Times Media

Sun-Times Media

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Updated: May 3, 2013 12:15PM

Gender discrimination is coming — and it’s perfectly legal. The Long Term Care insurance industry has finally recognized the obvious: Women live longer than men. And because women live longer, they use more benefits from their long-term care insurance policies.

In fact, the most recent figures show that two-thirds of all long-term care claims were paid to females, and 70 percent of the dollars paid out by insurers were paid to women. That’s a significant number, when you realize the industry paid out more than $6 billion in claims in 2011.

So, belatedly, the LTC insurance industry is about to change from unisex pricing based only on age, to a gender-specific model, as they do with life insurance. This idea is that this will better price the risk to the insurer. The reality is that prices of long-term care insurance policies will rise as much as 40 percent for women!

Genworth has announced the gender-specific pricing will start in the second quarter, and other insurers will certainly follow. Plus, they will start using stringent medical underwriting to determine whether you qualify. So if you’re a woman who is considering the purchase of a policy, the time to act is now before prices rise.

Why buy LTC insurance

You might be asking yourself why you should buy a policy — especially in light of recent price increases throughout the industry on existing policies. Insurers belatedly realized that people were living longer — and making more use of their policies. They corrected their pricing assumptions by raising premiums on existing policies by as much as 90 percent over the past few years. And the industry stopped offering some of their best benefits, such as 10-pay policies. So why buy now?

“The issues of long-term care — custodial care, not medical care — are not going away anytime soon and people need to take the responsibility on their own to plan for this type of an event,” says Brian Gordon of MAGA LTC, an insurance brokerage that specializes in long-term care insurance says. “Government cannot provide the kind of care you want for your parents or yourself.”

He notes that if you’re buying a policy today, it’s far less likely that you’ll have large future price increases because insurers have planned better. But there is one more good reason to have even a small amount of long-term care insurance: It will gain you entry into the better facilities, which will be looking for paying customers, as opposed to those who rely on Medicaid.

According to Stephen Moses of the Center for Long Term Care Reform, Americans spent $149.3 billion on nursing facilities and continuing care retirement communities in 2011. The percentage of these costs paid by Medicaid and Medicare has more than doubled in the past four decades to 56 percent of the total, as people have relied on the government to take care of them.

But just think about the strains on state and federal budgets, which will grow as boomers need care. Will you want to be in a state Medicaid-funded nursing home? I thought not. So with even a partial policy that covers just half of the projected costs, plus your Social Security, you will be able to buy your way into much better care.

Just the basics

Today’s average annual cost of nursing care — in home or in a nursing home — is about $9,000 a month. But if you purchase coverage for $5,000 a month of care, it could make the policy more affordable. The following quote is from MAGA LTC (800) 533-6242:

For example, a 60-year-old woman, under today’s pricing schedules (before gender-based increases go into effect), could buy a $5,000 monthly protection for either home care, assisted living or a nursing home. This policy gives three years of coverage (or longer if you use less money daily for home care), with 3 percent compound interest growing the benefits, and a 90-day elimination period — all for an annual premium of $2,438.77.

That’s paying roughly $200 a month for the ability to sleep well, knowing that you will not be forced into a state-funded nursing home in your old age. (The average nursing home stay is less than three years.) If you can possibly afford that premium, you get not only the care coverage, but a care coordinator to assist you with planning at a time when you might be least able to manage your own care.

Yes, presumably there will always be Medicaid nursing homes for those who really can’t afford to pay. But given the trends, and despite the higher premiums, even a little bit of LTC coverage buys a lot of peace of mind. Even if you don’t ever need to use it.

Combo policies: LTC, life, cash

There is another alternative for those who have some “extra” money set aside, and worry about paying into a LTC policy, and then never using it. (That’s the hoped-for outcome — that you’ll live a long, healthy life and then die suddenly, never needing custodial care.)

Combination policies offer benefits that include both a life insurance death benefit if you never use the care, or a leveraged amount of nursing care — or the ability to withdraw cash for any purpose.

With these policies you take a lump sum of money that you have set aside for your old age to purchase a policy such as Lincoln Financial’s MoneyGuard Reserve Plus. For example, if you put $100,000 into this policy, it would buy you a monthly long-term care benefit of $3,932 for a three-year period with 5 percent compound inflation protection. But if you die without using the benefits, your heirs would receive a death benefit of $141,541. And you could withdraw your cash as a policy loan, if you need money for any reason.

Gordon of MAGA says more people are considering this type of policy, because of its versatility and liquidity. Of course, that assumes you have the initial money to “invest” in this type of coverage.

No one wants to think about the need for long-term custodial care, much less the cost. But the longer we live, the more likely we will need some kind of care that is not covered by Medicare or supplements. So, despite the recent bad publicity about rising premiums, you might want to check into buying a policy now. Especially if you’re a woman. And that’s The Savage Truth.

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