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Is Long-Term Care Insurance Part of Your Financial Planning And Asset Protection Strategy?

Is Long-Term Care Insurance Part of Your Financial Planning And Asset Protection Strategy?. 800-496-3572 www.ipg-us.com. JTR 2004 Revision 3.12.4. Presentation Provided By: J.T. RYAN & Associates, Inc . IPG’s Long Term Care Partner. What is long-term care (LTC)?.

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Is Long-Term Care Insurance Part of Your Financial Planning And Asset Protection Strategy?

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  1. Is Long-Term Care Insurance Part of Your Financial Planning And Asset Protection Strategy? 800-496-3572 www.ipg-us.com • JTR 2004 • Revision 3.12.4 Presentation Provided By: J.T. RYAN & Associates, Inc. IPG’s Long Term Care Partner

  2. What is long-term care (LTC)? • No longer able to live independently • Prolonged physical illness • Disability • Cognitive impairment • JTR 2004

  3. When am I eligible for benefits? • Require help with two activities of daily living: • Bathing • Dressing • Eating • Continence • Toileting • Transferring • Require supervision due to cognitive impairment • Memory • Orientation • Reasoning • JTR 2004

  4. What’s my risk of needing LTC? • Nearly 80% will live to be age 65 or older • 60% to 70% of Americans age 65+ will need LTC • Half of all women 65+, one-third of all men 65+ • “At risk” group female baby boomers • Average stay in facility today is 2.6 years • 24% who enter a facility stay a year or longer • 9% spend five years or longer • Young Americans also need LTC • 40% of those receiving LTC are age 18 to 64 • JTR 2004

  5. Daily Nursing Home Costs $156 Atlanta $232 Boston $172 Chicago $147 Dallas $246 New York City $174 Phoenix $312 San Francisco $185 Seattle Home Care Hourly Rates $18 Atlanta $21 Boston $18 Chicago $17 Dallas $15 New York City $18 Phoenix $20 San Francisco $20 Seattle What is the cost of LTC in 2004? • National average today for nursing home care is $181 a day • Average long-term care stay in facility lasts 2.6 years • Average cost of long-term care event is $171,769 • JTR 2004

  6. Daily Nursing Home Costs $413 Atlanta $615 Boston $456 Chicago $390 Dallas $652 New York City $461 Phoenix $827 San Francisco $490 Seattle Home Care Hourly Rates $48 Atlanta $56 Boston $48 Chicago $45 Dallas $40 New York City $48 Phoenix $53 San Francisco $53 Seattle What is the cost of LTC in 2024? • National average is for nursing home care is projected to be $480 a day • Average long-term care stay in facility lasts 2.6 years • Average cost of long-term care event is $455,520 • JTR 2004

  7. But I’m covered by Medicare • Not designed as a long-term care product • Pays 100% of first 20 days in SNF • Must be hospitalized three days • Must enter SNF within 30 days • Must require “skilled” care • Pays amount in excess of $109.50 next 80 days • Pays $0 beyond 100 days • JTR 2004

  8. Medicare, Medigap and LTCI • JTR 2004

  9. Who funds the cost of LTC? • 10% Insurance companies • 14% Medicare • 32% Family income, savings and investments • 44% Medicaid • 43% Funded by States • 57% Funded by Federal Government • Must have “spent down” assets to poverty level • JTR 2003

  10. Why do people buy LTCI? • Protect assets • Preserve independence • Quality of care choices • Avoid depending upon family and friends • JTR 2004

  11. Families and care-giving • 84% of working caregivers changed work hours • Lost an average of $659,000 in compensation • Within two years suffered serious illness • JTR 2004

  12. Protection for financial security • Auto insurance • Home insurance • Health insurance • Life insurance • Long-term care insurance? • JTR 2004

  13. Without Insurance LTC expense could totally deplete a $500,000 nest egg in five years. Assumptions: 1. Family savings of $500,000 including retirement income and savings 2. Household living expenses of $50,000 annually plus 3% annual inflation 3. Nursing home expenses of $66,065 annually plus 5% annual inflation 4. Remaining annual savings earn 8% per year • JTR 2004

  14. Is LTCI appropriate for me? • Are you between the ages of 40 and 60 (18-84)? • Excluding your home, are assets >$30,000? • Can you afford the premium? • JTR 2004

  15. What determines the policy costs? • Age • Health status • Daily benefit • Benefit period • Elimination period • Type of care – facility, home or integrated • Inflation protection • Other benefits • Discounts that may apply • JTR 2004

  16. Purchased Today at Age Daily Benefit Benefit Period Inflation Protection Annual Premium 40 $100 Lifetime 5% Compounded $1180 45 $100 Lifetime 5% Compounded $1336 50 $100 Lifetime 5% Compounded $1524 55 $100 Lifetime 5% Compounded $1850 60 $100 Lifetime 5% Compounded $2359 65 $100 Lifetime 5% Compounded $3325 Premium examples • Assumptions: • Standard health status • Elimination Period of 100 days • 100% Home Care • No discounts applied • Indemnity payment method • JTR 2004

  17. What’s important in an LTCI policy? The company! • Size • Billions or millions in assets? • Other lines of business • Insurance or manufacturing? • Reputation • Rate increases and complaint ratios • Ratings • AM Best, Moody, Fitch, Standard & Poor’s • JTR 2004

  18. What else is important? Type of care • Nursing facility • Assisted living facility • Alzheimer’s facility • Continuing care retirement community • Home care • International • Combination or integrated • JTR 2004

  19. The tax issue • Tax Qualified • Two triggers • Assistance with 2 ADLs • Cognitive impairment • No “necessity” trigger • 90-Day certification • IRS $230 per diem cap • Conditional deductibility • Non-Tax Qualified • Three triggers: • Assistance with 2 ADLs • Cognitive impairment • Medically necessary • No 90-day certification • May include “necessity” • Benefits taxable? • Premiums deductible? • JTR 2004

  20. What about options? • Inflation protection • Compound or simple • Payment method • Reimbursement or indemnity • JTR 2004

  21. Inflation options • JTR 2004

  22. Reimbursement payment method • Covers care in a facility • Covers home care by certified providers • Covers supplies approved by certified providers • Can be more flexible if care coordinator used • Does not reimburse if paid by another source • Stretches pool of funds • JTR 2004

  23. Indemnity payment method • Monthly or daily cash payment • Covers care in a facility • Covers home care • Care can be provided by informal caregivers • Incidental charges covered • Premiums more costly • Greater flexibility • JTR 2004

  24. Claims payment example: • Assumptions: • Age 50, $130 daily benefit, 5% compounding • Age 80, $561 daily benefit • Home health aide $60/hour in 30 years • Reimbursement payment: • Aide used 3 hours/day • 3 hours X $60 X 30days = $5,400 • Indemnity payment: • Policy pays 30 days X $561 = $16,830 • Difference of $11,430 can be used as needed • JTR 2004

  25. Why indemnity? • 70% of Alzheimer’s patients live at home • 75% of care provided by unpaid caregivers • 66% ADL assistance by family and friends • JTR 2004

  26. Other important options • Return of Premium • Survivor benefit • Payment Options • Flexibility for retirement income changes • Shared Care • A solution to rising premiums • JTR 2003

  27. Shared Care • A solution to escalating rates for new clients • Offers a less costly policy • Provides significant benefit period • Allows one spouse to use another’s benefits • If spouse dies, remaining benefits go to survivor • JTR 2004

  28. Lifetime Ages: 65 and 63 Daily Benefit: $120 Elimination Period: 90 days Inflation: 5% compounded Risk Class: Standard Benefit Period: Unlimited Indemnity Rider: Yes Premium: $5969 MetLife Indemnity Comparison Shared Care • Ages: 65 and 63 • Daily Benefit: $120 • Elimination Period: 90 days • Inflation: 5% compounded • Risk Class: Standard • Benefit Period: 4 years/person or 8 years combined • Indemnity Rider: Yes • Premium: $4273 • JTR 2004

  29. Year/Age Purchased Daily Benefit Annual Premium Years To Age 80 Premium Paid Year 1 40 $100 $861 40 $34,440 Year 5 45 $130 $1268 35 $44,380 Year 10 50 $160 $1780 30 $53,400 Year 15 55 $200 $2701 25 $67,525 Year 20 60 $260 $4458 20 $89,160 Year 25 65 $340 $8252 15 $123,780 The cost of waiting • This chart illustrates how LTCI premiums for the equivalent of $100 Daily Benefit in 2003 dollars are impacted by age and expected increase in healthcare costs. The example assumes benefit eligibility at age 80. Quote based on the following criteria: • 1.Single 2.Standard health rating • 3.MetLife Value Plan with Indemnity Option 4.$100 Daily Benefit equivalent adjusted at each age purchase • 5.100-day Elimination Period 6.5- year Benefit Period • 7.5% compounded Inflation Option 8.No discounts applied • JTR 2004

  30. The risk of waiting • At age 65, 23% uninsurable • At age 75, 31% uninsurable • JTR 2004

  31. Is Long-Term Care Insurance Part of Your Financial Planning And Asset Protection Strategy? • What is long-term care? • How much does it cost? • Is long-term care insurance appropriate for you? • What’s important in a policy? • JTR 2004

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