How and When to Shop for Long Term Care Insurance
Jesse is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Let me start with a disclaimer. I am executive director of the American Association for Long-Term Care Insurance and it's my job to advocate on behalf of planning. But, after working in this industry for nearly two decades, I will say that not everybody should buy long term care insurance ... many people buy too much ... and lots of people needlessly pay too much.
Finally, I do not sell insurance. My hope in writing here is to shed some honest and balanced light on what is a very (VERY) complex topic. Frankly, after nearly 20 years, I continually learn and I think that's what keeps me interested.
So what I'd like to do is start with some of the common misconceptions that I find (as a result of fielding lots of calls from consumers).
What's the Best Age to Start Looking into LTC Insurance?
My advice is somewhere between ages 52 and 64. Today, your health (when you apply) is the most important factor and quite frankly after passing age 50 (I am 59 for full disclosure) few of us walk out of the doctor's office without a prescription in hand. Those health conditions --- the ones that won't kill you --- could prevent you from health qualifying for LTC insurance (no matter how much you'd be willing to pay).
I'm often asked why I picked age 64 for the range. It's simple. When we reach age 65, we all celebrate the fact that we now qualify for Medicare. And, if you watch TV, you know that Medicare encourages and covers a whole range of health preventive screens. Just the kind of medical tests that can uncover a condition that will preclude you from health qualifying.
Insurance companies don't like me saying so, but you have an advantage over their underwriters -- that is until you go to the doctor.
What's The Best Way To Shop?
You can not buy this insurance directly from a company. You are going to have to work with either an agent or a broker. And that's a very important difference. An agent works for and represents just one company -- that's basically all they have to sell you (like a Ford dealer who sells Fords). A broker on the other hand represents multiple insurers. Some just two or three ... others if they do enough business have access to six or more (there are not that many insurers offering LTC insurance today).
Why does it matter? Because we do an annual Price Index at the Association and the range in prices for virtually identical plans of protection can range from 60% to 100%. You only buy long term care insurance once (it almost never pays to switch companies once you are accepted) so doing it wrong can cost you not just in year one, but for many years to come.
The following publicly held companies offer long term care insurance and linked long term care products to consumers: Genworth Financial (NYSE: GNW), John Hancock owned by Manulife Financial (NYSE: MFC), Transamerica owned by Aegon (NYSE: AEG) and Lincoln Financial Group, owned by Lincoln National Corp (NYSE: LNC). According to the 2012 Long Term Care Insurance Sourcebook published by AALTCI, based on the most recent data Genworth accounts for 16.36% of the covered lives, John Hancock for 14.02%, Transamerica for 3.62%. Lincoln Financial offers an asset-based product and is not included in the same catregory.
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