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LTC Health Chassis

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April 23, 2012 by Milton Jones

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Okay, so you’ve become aware that your life’s savings is at risk in the game of Long Term Care.  You know about the “spend-down” rules before getting public financing. So how do you plan?  You could buy LTC insurance.

In the landscape for Private Long Term Care Insurance, there are two major alternatives:

•    The Health Insurance Chassis, and
•    The Life Insurance Chassis.

We will first explore the Health model.  Let’s say you’ve looked around and determined that $150 per day is about the realistic starting point for cost of Custodial Nursing Home care. Furthermore, assume you are a couple age 60 and 58 respectively. So what would you expect to pay for such coverage? It depends on a lot of variables.

Some people will buy a two-year maximum benefit plan, while others insist on a lifetime benefit. The average nursing home stay is 30 months, but who’s average?

Then there’s the matter of Inflation.  The government insists that everyone buying LTC insurance be offered Inflation Guard as an option. For example, 5 percent compound increase in benefits. I can tell you from experience that costs of care have more than doubled in the past 15 years.

Mutual of Tupelo (not the real name) offers the following rates for preferred risks:

Example I: $150 day for 2 year maximum benefit, with 90 day elimination; monthly premiums are $106.52 without Inflation Guard, and $197.58 with. (The elimination period is the time deductible, or the amount of days you must pay out of pocket before benefits kick in.)

Example II: At the other extreme, Lifetime benefit with 90 day Elimination would be $224.59 basic, or $483.37 with Inflation Guard.  In these examples the Inflation benefit is for the first 20 years, and level’s off thereafter.

Perhaps you realize that two years may not be enough, but get sticker shock from the cost of the Lifetime plan.  Is there something in between?

Yes, there plans of three years, four years, five years, etc. with numerous variations and features; however, space does not permit a more exhaustive list.

Rates are much lower by starting at an early age.  For example, if we add 10 years to John and Sarah the cost are approximately triple!

Finally, be aware this is a heavy duty risk, so choose a heavy weight company.

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