Do you need Long Term Care Insurance?

Transcript of Interview: “Do you need Long Term Care Insurance?”

Mike Barnes:

We all know, or we’re finding out very quickly, that it’s very, very expensive once you get older trying to take care of yourself or take care of your mom and dad.

Kim Barnes:

Absolutely. One of the things you hear a lot about is long-term care insurance, and it can be pretty confusing as to what it covers, what it doesn’t, what it actually does, and whether you actually need it. So today, we’re going to bring in Roy Snarr of Snarr Financial and Insurance Services to sort of help us explain this and get the high-level details because it is a pretty confusing topic and we could be here all day, couldn’t we?

Roy Snarr:

Absolutely.

Mike Barnes:

So let’s just start with people hear long-term care insurance and they may have different ideas that pop into their head or assumptions. Let’s just start with kind of the overall definition or explanation of what it actually is.

Roy Snarr:

Sure. Long-term care is also known as extended care, so there are two different names for it but virtually the same thing. Basically, it is defined as someone who has a cognitive impairment like Alzheimer’s or dementia or someone who is unable to perform two out of the six daily living activities, which are defined by HIPAA. Statistically, it’s going to range around 50% of people who will need it at some point in their life, more towards the very end stage of life.

Kim Barnes:

So this is long-term care insurance, then, which helps offset some of those costs.

Roy Snarr:

That is correct. Long-term care insurance can mitigate some of these financial risks and also the emotional burden on the family. Most people experiencing a long-term care event now, if you were to ask their parents if they could change anything and go back 20 years, they probably would have implemented some sort of long-term care plan, which includes insurance. The insurance aspect is the financial revenue that can help offset the enormous cost. Nationwide, it’s around $50,000 to $60,000 a year depending on where you go, and those costs are only going up. If you don’t have anything in place, you might be forced to liquidate other assets in order to qualify for Medicaid, which is the state program, but it’s not that easy to qualify for.

Mike Barnes:

Is it just like life insurance or auto insurance where there are different levels that you can get?

Roy Snarr:

Yes, that is correct. The more money you give an insurance company, the more benefit they’ll give back to you. There’s a plan for everybody, and one of the big things they take into consideration is your health. There are even plans that are guaranteed issue, so even if you have significant health issues, you can still get long-term care insurance. Just a lot of people are unaware of it. What we do is plan accordingly. You want to have something that is comfortable with the budget or comfortable placing assets with. One of the big differences with today’s long-term care versus what it used to be is that people can have a return of premium. They can have plans that are 100% liquid, meaning they can get all of their money back if they pass away to their family. They are much more flexible than they used to be.

Kim Barnes:

I would assume that the healthier you are, the lower your premium might be. So they take your health into consideration, potentially?

Roy Snarr:

They do. The risk for long-term care is similar to auto insurance. If you have a DUI and speeding tickets, you’re a higher risk and you’ll pay a higher premium. With long-term care, they assess the likelihood they might have to pay out. If it’s a higher likelihood, they might charge a higher premium. Fortunately, with today’s plans, especially in our marketplace, you can have plans that are guaranteed level premium, which means they never increase. There are no surprises, so whatever you have today is set for the rest of your life.

Kim Barnes:

Some people may have gotten these through their employer, so they may not even know about it, correct?

Roy Snarr:

That is very true. A lot of times, parents will call in and say they’re having an issue with their parents or grandparents, and they don’t know if they even have long-term care. The first thing we do is suggest they look at their bank statements. If you have the power of attorney, you can check the bank statements to see if there’s an insurance draft coming out either monthly, quarterly, semi-annually, or annually. Another option is to talk to their old employer. Maybe they worked for a big firm and you can call the HR department to see if they had a group long-term care plan and if it transferred over. These are things people don’t usually think of, and it can actually help provide coverage. We’ve found coverage for people who had no idea they even had it.

Mike Barnes:

You don’t want to leave benefits unused if you have them on the table. If your parents have one, what do we need to know to help them understand how to use it better?

Roy Snarr:

Great question. If they do have a policy, the first thing to do is find a local professional who specializes in long-term care to help you understand the contract. We help a lot of people with that at no charge. Another option is to call the insurance company directly. If it’s ABC Insurance Company, for example, you can say you have the power of attorney and ask them to explain how the policy works and how the claims process works. Call the claims department, get everything ready, and if you feel your parent or loved one is eligible, go ahead and apply. The worst they can say is no, but starting the process early is crucial because insurance companies are slow. It’s better to get ahead of it than to wait until the last minute.

Kim Barnes:

If they find out late that they’ve been paying for something for years, can they backtrack and get paid for something in the past?

Roy Snarr:

Not usually. A lot of people ask that. There is usually a 90-day or 180-day elimination period, depending on the contractual terms, and it only starts once the claim is submitted. Some policies start once the diagnosis happens, so it’s variable. Generally speaking, they won’t back pay you because it’s your responsibility to understand how to use the policy, even though it is hard.

Kim Barnes:

Is it also true that some policies are for a limited time, so you may not want to start filing claims if you know you only have a few years of coverage?

Roy Snarr:

Correct. A lot of people think they can get an insurance check and go to Vegas with it. Some policies allow you to spend the money however you choose—these are called indemnity policies. Most policies purchased 10 to 15 years ago are known as reimbursement policies, so the insurance company will only reimburse the client for qualified long-term care expenses. Sometimes that means getting receipts together, and sometimes the insurance company works directly with the facility or in-home service to process it. Most policies have a three-year or five-year benefit period, while some are lifetime. If you feel there’s eligibility, try to take advantage of the insurance while you can. If you postpone and something happens, you might miss the opportunity to utilize that insurance policy.

Mike Barnes:

So it’s really important to know what kind of policy it is and what options there might be.

Roy Snarr:

Exactly. You want to understand what kind of policy it is. If it’s going to revert back to the family, you might not want to use it as much, but if it’s use-it-or-lose-it, you want to make sure you take advantage of it. Hopefully, you’ll never need to use it, but if you do, it’s a great benefit. People need to understand their policies because they may have bought it 10 years ago and have no idea how it works or if it’s still in force. We encourage everyone to check their policies and get it written down in their planning documents.

Kim Barnes:

What if we investigate and find out they don’t have any long-term care insurance? What’s the first step we need to take?

Roy Snarr:

The first thing to do is look at their health to see what they’re potentially eligible for. Long-term care can cover you even if you’ve had heart attacks, cancers, or strokes. There are guaranteed issue plans for those who are not very healthy. You want to become educated about the process and understand that you can get coverage up to age 85. We’ve helped someone who was 84 years old get coverage.

Mike Barnes:

Is it going to be super expensive?

Roy Snarr:

That’s a great question. Long-term care insurance can seem expensive, but it is a much smarter, more leveraged, and tax-efficient way to self-insure. There are policies with zero premiums where you park assets with an insurance company and get them back if you choose. If you need long-term care, they pay back the asset plus a leveraged amount. There are policies with low premiums you can pay for the rest of your life to reduce the cost. There are different options depending on your financial situation.

Kim Barnes:

Even if we think we’re moving mom into memory care next week or mom and dad have been in assisted living for the last two years, is it still worth checking to see if it’s financially better for them to try and get long-term care insurance?

Roy Snarr:

Exactly. Sometimes people will come to us with a parent already in a facility. We have to look at guaranteed issue or other alternatives that are less traditional. There is always an option for somebody, regardless of their health situation. It comes down to simple financials, and sometimes we’re not able to help, but the learning process is important. We can help protect the next generation so their kids don’t have to go through what they’re living through.

Kim Barnes:

There are lots of things we’re learning as we care for our parents that help us be better prepared for our children. So it’s something people might want to look into.

Roy Snarr:

Absolutely. It’s a complicated topic, so thank you for helping us break it down to be more understandable and giving us the right language and understanding so we know what to ask and where to get help.

Mike Barnes:

I think what we’re learning is that you have to ask the questions and figure out what’s best for your situation.

Kim Barnes:

What options do you have.

Mike Barnes:

If you have any other topics you’d like us to discuss, please let us know. Parenting Aging Parents.

*This transcript is auto-generated. Please excuse any typos or mistakes.