Long Term Care Insurance

1
Long Term Care Insurance

• By Ashley Hastings

2
Getting Started

• Explanation of Long Term Care
• Explanation of the costs and payment options
  related to Long Term Care
• Explanation Long Term Care Insurance

3
Definition of Long Term Care

• Services delivered over a sustained period to
  persons who have lost some degree of physical or
  cognitive capacity.
• Services provided for those individuals who need
  assistance with the activities of daily living.

4
Activities of Daily Living

• Bathing
• Dressing
• Eating
• Toileting
• Transferring
• Continence

5
Long Term Care Users

• At age 65, a woman has a 1 in 2 chance of
  spending some time in a nursing home. A man has a
  1 in 3 chance.
• In addition to those over 65, there are five
  million working age adults and 400,000 children
  who need help with the activities of daily living.

6
Costs of Long Term Care

• The annual cost for a stay in a nursing home in
  2003 is projected to be 53,600, or 147 a day.
• By 2020, the annual costs are projected to be
  106,000, or 290 a day.
• The average stay in a nursing home is 2.4 years.

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Cost Comparison (Based on 2003 projected annual
cost of 53,600)
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Long Term Care Insurance (LTCI)

• Long Term Care Insurance is used to indemnify
  those individuals who are unable to care for
  themselves due to old-age, injury, or chronic
  illnesses.
• Once an individual illustrates a need for
  assistance with any two of the activities of
  daily living, or a cognitive impairment, he or
  she is eligible to receive LTCI benefits.

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Structure of LTCI Plan

• Individuals must decide on some key structure
  issue when purchasing LTCI. These issues are
• Daily benefit level
• Duration of the daily benefits
• Protection from inflation
• Waiting period

10
Daily Benefit Level

• Individuals must choose how much of a daily
  benefit they want.
• The typical benefit level is 100/day which is
  available for the payment of nursing home care or
  other skilled care.
• Benefits can also sometimes be paid on a weekly
  or monthly basis.

11
Duration of Benefits

• Individuals must decide how long he or she wants
  the daily benefits to last.
• For example, an individual with a 100 daily
  benefit intended to last 5 years will actually
  have a total benefit maximum, or duration, of
  182,500.
• (100 x 365 days/yr x 5 years)

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Protection from Inflation

• Steps must be taken in order to protect against
  inflation.
• Individuals can purchase an automatic inflation
  benefit, or a periodic inflation option.
• Automatic inflation benefit Increases the daily
  benefit amount on an annual basis. The Compound
  5 Inflation Rider is the most common.
• Periodic inflation option This allows an insured
  to purchase more insurance without having to
  prove good health.

13
Waiting Period

• Individuals must wait a certain amount of time
  before the insurance takes into effect.
• This waiting period is based on premium price,
  with the higher premiums resulting in a shorter
  waiting period.

14
Annual Premiums(As of October 1999, for a Basic
TIAA Long-Term Care Policy, from TIAA_CREF
Corporate WebCenter, October 1999)
15
Odds of Using Coverage(From http//www.ltcinsuran
ceservices.com, viewed November 2001)
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Summary

• Half of the female population and a third of the
  male population will need Long Term Care.
• Unfortunately, the costs of Long Term Care are
  rising.
• Individuals need to plan ahead and decide how
  they will finance their long term care needs.
• The most cost effective way to do this is through
  Long Term Care Insurance.

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Summary

• Individuals need to consider all of the options a
  plan has to offer and to decide what best meets
  his or her needs, and what premiums can be
  afforded.
• Most people will use Long Term Care Insurance at
  some time, so everyone needs to be aware of this
  issue.