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What's the best way to calculate how much long-term care insurance coverage I should buy?

My mother's hospice care was more than she could afford so my brother and I have been helping to pay the costs. I don't want to leave my kids in this situation, so I'm wondering how much/what kind of long-term care insurance to buy.

Mar 13, 2012 by Harrison from Rockville, MD in  |  Flag
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6 votes

In order to calculate how much long term care insurance you will need, I recommend you find out what the average cost of care in your neighborhood is.

You also may want to account for inflation - we believe these costs are going to increase. You may want to look for a policy that has a compound increase rider (this means the benefit you elect will increase annually - compounded.... but more of a benefit than "simple" increase).

Riders are additional guarantee options that are available to a long-term care insurance contract holder. While some riders are part of an existing contract, many others may carry additional fees, charges and restrictions, and the policy holder should review their contract carefully before purchasing. Guarantees are based on the claims paying ability of the issuing insurance company. In addition Insurance companies alone determine insurability, and some people, for their own health or lifestyle reasons, are deemed uninsurable.

Melissa Levin, CFP® CA Insurance Lic #0C56086 714-547-8787

Due to industry regulations, the advisor may not post additional reply comments. If you would like to contact the author, please email her at Melissa.Levin@lpl.com. Melissa Levin is a LPL Registered Representative with, and securities offered through LPL Financial, Member FINRA www.finra.org /SIPC www.sipc.org

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing.

1 Comment   |  Flag   |  Jun 19, 2012 from Cowan Heights, CA
Evan M. Levine, ChFC

Melissa, I have found the most practical way to address this issue is to start with a budget. How much can you reasonably afford to allocate to this issue each month? From there you can create and mold the right type of policy for you, considering; the benefit amount, the benefit period, the waiting period, inflation and other riders et. cetera. Good luck.

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Flag |  Jun 20, 2012 near Port Washington, NY

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5 votes

I'm sorry for your loss. I don't sell Long-Term Care Insurance, or any products for that matter. As a financial planner, I know the cost of medical and long-term care is one of the greatest wild cards in our financial future. You've lived through it already in your Mother's case. So, you know first hand. So, if you believe in using insurance to transfer some or all of such an unpredictable risk, I suggest you insure yourself at the upper end of the benefits scale. This means you should find out what it costs today for care that meets your needs and comfort level. Go for a daily benefit at the higher end of the scale, perhaps even a little more. Add inflation protection. And, choose a provider with a long record of premium stability. For some, this means you should purchase as much as you can afford. For others, this means buying LTC insurance like you buy your house or your car - go for the best model available.

Comment   |  Flag   |  Mar 13, 2012 from San Diego, CA

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Well Harrison, great question, but to be accurate, we’d have to know what the future inflation rate for those services was. Many older policies issued offer an inflation rider that increased the benefit from the date of purchase by 5% each year. When I first started selling those policies, nursing home costs were going up by 7-8% a year. Back then, the daily average cost was $170 a day, so we often started with a $200 a day benefit to adjust for the smaller annual increase that would occur compared to inflation. But the past couple of years, nursing home costs have flattened a bit and the inflation rider is providing more benefit than required.

These days, most carriers simply offer an inflation rider tied to the CPI. But that doesn’t ensure you will also be able to keep up. The cost of care will surely differ from CPI from year to year. You can overbuy your daily benefit today, but if you acquire a daily benefit consistent with current costs and a CPI rider, you should be fairly close to what is actually needed.

Comment   |  Flag   |  Mar 13, 2012 from East Dundee, IL

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Harrison, Each situation is diffrent and Long Term Care is a very complex product that can be structured endless ways- in terms of benefit amount, waiting period, benefit period and numerous optional riders ( add -on's). You need to work with a specialist directly. Feel free to call me at 917.696.0674 or E-mail at evan@completeadvisors.com. I can help. Thanks.

Comment   |  Flag   |  Mar 13, 2012 from Port Washington, NY

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Adi Benyishay Level 13

I recommend:

1) Three years of coverage. 2) Researching the average per day cost in your area. The annual average is about $200 per day. 3) Inflation protection 3-5% every year. The higher the better. 4) A comprehensive plan that covers home care, assisted living, and nursing home.

Comment   |  Flag   |  Apr 12, 2013 from Southampton, PA

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Hi Harrison! Long-term care presents such a challenge - there is no one best answer. Each advisor here has a good perspective on the questions to ask factors to consider. My initial advice is to take care of your health now. Change to a low-sodium diet with little processed food, drink lots of water, and exercise. Here's the downside of that: if you have a healthy body and need long-term care for dementia, you may outlive your policy coverage or amounts. It's a catch-22 with a complex product, so be sure to consult with an expert.

Comment   |  Flag   |  Apr 12, 2013 from River Hills, SC

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While all the above answers are excellent, many companies, after seeing the true cost of long term care, have changed the way their contracts are written. More often than not , of late, I'm seeing policies that are tied to a "bucket of money" benefit. You still choose a daily, weekly, or monthly benefit, and it should cover in-home as well as facility charges. But, instead of just having a "number of years" benefit, the contracts would be based on a "maximum charges" benefit. I'd definitely find a local Financial Advisor who is licensed and experienced with Long Term Care. The industry is changing, and you need to find someone who you can trust in making these decisions. Rod Miller, CFP, CLU, ChFC

Comment   |  Flag   |  Apr 12, 2013 from Springfield, MO

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Find an Assisted Living or Long Term Care facility where you would potentially like to live at some point. Determine the gap between what income will have coming and the inflation adjusted cost of the faciltiy. Fill the cost gap with a LTC Policy with an inflation adjusted benefit amount.

Comment   |  Flag   |  Jan 17, 2014 from Canton, GA

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All good answers here. You might find this resource helpful.

http://longtermcare.gov/costs-how-to-pay/costs-of-care-in-your-state/

Comment   |  Flag   |  Jan 19, 2014 from Alexandria, VA

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