Insurance providers have a policy to overcome the most common consumer objection to purchasing term life insurance: what If I live? For those consumers who think term life insurance is a waste of money because they may not die, here is something to consider. If you can work a little extra premium into your budget here is a way to avoid the gamble and still protect your loved ones “the real purpose for life insurance” and recieve a cash benefit for staying alive.

What is ROP Return of Premium Insurance?

Return of Premium Insurance (ROP) is just as it sounds. The ROP is a rider attached to a basic term insurance policy that provides a living benefit to the insured. This means that should you outlive your policy term and keep it in force to the end of the level term period, you can receive all of your premiums back in a tax-free lump sum. The policy is similar to term in that it protects your family for a specified time period you select from 10 to 30 years. The ROP premiums are bit more costly than straight term in that the extra 30-40% you pay in premium is reinvested by the carrier and returned to the insured if they outlive the policy.

Why should you consider Return of Premium Insurance?

While insurance protection can be vital to protecting your family, many can find which type to purchase confusing. Let’s review the whole insurance picture for a moment: Term life insurance is the choice of many consumers because it fits the budget and simply protects young healthy expanding families during times of highest risk of loss should the income earner of the family die unexpectedly.

Traditional term provides a benefit for the length of the term period selected 10, 20, or 30 years after that the policy coverage ends. If the insured had passed on during the term of coverage the beneficiaries would have received a lump sum payout, but if the insured is still living at the end of the term or had cancelled the policy early, the beneficiaries receive nothing. Unfortunately after 20-30 years you may be uninsurable for more term because of health deterioration or age and may need to seek out a whole life or permanent insurance policy to protect your spouse or assets from risk during the retirement years. This form of insurance contain an investment feature which builds cash value and may require higher premiums and make the policy simply unaffordable for some. Return of premium can provide a suitable solution if it fits comfortably within the budget because it provides for a benefit for both events: A death benefit and a living benefit!  

What are some of the features of return of premium ROP insurance?

As we have already mentioned if you outlive the term you will receive all of your premiums back in a tax free lump sum and it is guaranteed. In addition should you need to borrow from these funds many carriers have loan provisions allowing you to borrow your own money at reasonable rates of interest and keep the coverage in place during the term period.  Many consumers are concerned that they may  cancel prior to the term ending and will lose the ROP feature they paid extra for, however carriers have already considered this as well and if you surrender the policy during the term you will receive back a prorated portion of the premium which are pre-calculated at policy inception. Another handy feature can help you keep your protection if you lost your job well into the policy term the ROP cash accumulation could be applied to provide for paid up reduced term period coverage, so if you had a 30 year term and in year 15 were injured or loss you job and were unable to pay premiums you may end up with a paid up policy for a remainder of 5 years.

Example

Male 32 years old with the highest health rating of Preferred Plus, $500,000 of coverage on a 30 year return of premium insurance term.

Monthly premium $54.98 Annual $659.76 the return of premium after 30 years would be $19,792.80

The premium for the same insured with straight term would be $38.06 per month

*If you are older or have a few minor health conditions the policy premium may be considerably higher as the carrier grades your mortality risks.

For most the Return of Premium can be a good option that can protect the family’s assets and large liabilities like the home in the event of an unexpected death. Additionally the lump sum return of premium can be used to pay down a considerable portion of those very liabilities , imagine paying $30,000 down on your mortgage balance in the 20th year or investing the tax free lump sum into an interest bearing annuity to create a retirement income stream for later years.

Estate planning is the process of accumulating and disposing wealth before death of an individual or estate owner. The most important goal of estate planning is to make sure that the greatest amount of the estate passes to the estate owner’s intended beneficiaries while paying the least amount of taxes. In this article, we will discuss the important role of insurance in estate planning cycle.

1. Creating wealth
Before one can build their wealth through investment vehicles, he or she must know how to save. In this stage, life insurance is always the first stage of estate planning cycle so it can guarantee there are funds around for the beneficiaries in case of sudden death. Most of the time, this stage applies to people just starting a family and have little savings. The type of life insurance used generally is term life insurance because it provides larger amounts of insurance with affordable premiums.

2. Wealth protection
a) In the later stages of a person’s life, when debt is diminished and wealth has been created, protection and conservation of the asset becomes more important. In this stage of the estate planning cycle, term life insurance is no longer provides enough protection. Therefore universal life insurance may be considered, since all investment funds up to maximum amount allowed each year that have been deposited in the universal life policy is tax exempt upon the death of policy insured.
b)Universal life insurance now becomes more important because all unrealized capital gains from stock accumulation, and the appreciation of rental property will have to pay upon the death of the owner. Since life insurance is tax free and is considered as a liquidate asset, it can be used for various purposes such as funeral expense, and paying income tax without selling estate asset at a cheap price if the person dies in the economic down turn.
c) Life insurance also helps to pay off liabilities of estate testator and acts as an emergency fund in case there are no other liquidate assets around.

I hope this information will help. If you need more information or insurance advices, please follow my article series of the above subject at my home page at:
http://medicaladvisorjournals.blogspot.com
http://lifeanddisabitityinsuranceunderwriter.blogspot.com/

MAKE YOUR TRAVEL WORRY FREE WITH TRAVEL INSURANCE

 

As you plan your next travel experience you should be certain not to overlook one very important detailâ??travel insurance. Many travelers opt to skip this step in the hopes of saving a little money. What you may not know is that insurance does not have to be expensive. In fact, this very cheap travel add-on can get you one thing that money does not always buy–peace of mind.

 

When you invest in a high quality policy you are guaranteeing that if the unthinkable happens and you or someone in your party experiences an accident or becomes ill, you are protected. For Australians traveling abroad, travel insurance will protect you from financial disaster should and accident or illness incur. You will also be protected in the case of property theft. The Australian government believes insurance is important enough to advise travelers to skip their trips altogether if they are not insured.

 

Medical situations are a particularly important consideration when determining whether or not to invest in an insurance policy. The need for insurance is not limited to international travel however, and you would do well to investigate insurance that covers inside Australia trips too.

 You can select an insurance policy that covers a wide range of misfortunes including trip cancellation or interruption, medical costs, and theft of property. Policies are available in a wide range of types from insurance for the mature traveler to special insurance for backpackers. Prices will vary policy to policy but you can find cheap travel insurance. There are many reasonably priced policies available that will offer you good coverage. If you are a frequent traveler, you may determine that an annual policy is the way to go or you may be able to secure insurance through your employer.

 

Finding cheap insurance to cover your trip is not difficult. You need only turn to the closest computer and search for trip insurance. You will find many websites that offer comprehensive search services. You will find sites that offer information and price quotations for single companies as well as good portal sites that will provide you with price quotations for a number of companies. All you need to do is enter your information once and youâ??ll receive all the information you need to locate a policy that will give you the comfort of knowing that you can travel without worry.

 

The next time you travel do not neglect to include travel insurance in your plans. It only takes one occurrence to erase your savings and eat up your nest egg. You do not want this to happen to you. When you purchase insurance for your trip you are not only buying peace of mind you are buying protection for your family and your assets. That is one detail you definitely donâ??t want to over look.

Any landlord who rents out his valuable property will be worried about its timely rental payment. Buy to let property is a valuable asset and a landlord is putting it at risk, by letting it out and feels that he canâ??t safeguard his rental payment. No, you must be having certain misconception. Professional tenant service agencies will help you find a potential tenant by carrying out various tenant background checks. This will not only assure you of a genuine tenant but will also protect your investment in property from being damaged by your tenant. You can also obtain the credentials of the tenant and based on this, you can take your own decision on whether to let your house to that particular tenant or not.

A tenant screening agency will get in touch with your prospective tenantâ??s previous landlord to find out, if he has paid rent on time. His employer reference checks is then carried out to confirm his employment status. Credit checks from past few years is also carried out to see if he has had any County Court Judgement(CCJ) etc. Banks are approached to collect the financial status of a tenant. With all these details cross verified by a professional tenant assessor, a landlord canâ??t make wrong decisions and rent out to a problematic tenant. Heâ??ll definitely make an informed decision in choosing his tenant before letting it out to a stranger. Moreover, he may have his content left in his furnished house for the tenantâ??s use too. Protection of these content is also required. Approaching a tenant servicing agency for landlord will not only guarantee you rental payment but will also offer you good tenant referrals by providing you reports on his credit, eviction, employment check and criminal record if any. A landlord can also find out if a tenant has paid his rent regularly and looked after the property or not.

A landlord can request for a detailed report of employment details, previous landlordâ??s information, credit history, CCJ cases and other financial details. Tenants should also take care while filling out all these information as a landlord will check for its accuracy and based on the assessment will either accept or reject a tenant.

Ease the burden of cross verifying all tenantâ??s information yourself. Save your time and money by letting it out to a reliable tenant.

Tenant reference
Tenant screening
Guaranteed rent payment cover
Buy to let investment management solutions

All of these above services are provided to you with an efficient and professional tenant assessment agency. Reach out to them on time and avoid repenting that youâ??ve a bad tenant in future. Acting smartly will save your hard earned money and protect your buy to let capital investment.

Income protection is one of the most important types of insurance that a person should have. Any person whose day to day living depends on them earning an income should protect it.

When purchasing an income protection policy there are a number of key points that a purchaser should keep in mind:
- Is the contract a cancellable or a non-cancellable contract?
- Guaranteed or indemnity contract?
- What is the maximum % of income that a person can insure?
- What is a waiting period and how does it work?
- What is the benefit period and how does it work?
- Indexation – Yes or No!
- Are stepped premiums more suitable than level premiums?
- Will I be covered if I am retrenched or become unemployed?

Non cancellable or cancellable contracts. One of the key features when purchasing an income protection policy is to ensure that the policy is a non cancellable contract -i.e. once accepted by the insurer the policy is automatically renewable irrespective of your claims history. With a cancellable policy however the insurer reserves the right to cancel the contract prior to renewal. This may occur in the event of an individual’s claim history or the potential claims from a group or particular occupation that the particular insurer now deems to be an unacceptable risk.

Guaranteed or Indemnity contract. With a guaranteed contract the sum insured (monthly benefit) is underwritten up front based on supporting financial evidence – e.g. payslips, and other forms such as your tax return. Once accepted by the insurer the monthly benefit is guaranteed to be paid at claim time. An indemnity contract works differently because the benefit payable is calculated on the individuals earnings which they have to prove at the time of a claim – this can be a problem if that person has suffered an illness but continued to work albeit in a reduced capacity hence lower earnings.

Maximum cover available. The maximum benefit payable in Australia is 75% of your usual income with some insurers allowing an additional 9% (for superannuation/retirement contributions).

Waiting Period is the length of time you need to be off work before you can claim any benefit. The shortest period is 14 days, with the standard being 30 days and the longest waiting period 2 years. Usually a person would link this to the level of accumulated sick leave that they have. Usually, the shorter the waiting period, the higher the premium.

Benefit period defines the maximum length that you will be paid for. Better quality polices have benefit periods up to age 60 or 65.

Indexation of Benefits. It is important to include indexation of benefits if you take a long term contract. This way the real purchasing power of your benefit is preserved.

Level or Stepped premiums. If you have a long term need which is generally over 15 years, you would be best advised to take out a level premium contract where the premium over the long term is averaged out and you pay a consistent premium level. If you only require cover for a short time frame of under 10 years you should take advantage of the initial premium savings found with stepped premiums.

Unemployment/ Retrenchment. Income protection policies are designed to cover loss of income through illness or accident only. Better quality contracts will however suspend cover if you are unemployed or retrenched and allow you to recommence (with limited underwriting).

Top Tips to keep the costs down include using level premiums, possibly splitting benefits to have some level of benefit with a 30 day wait and some with a 90 day wait. By paying annually you may find this is cheaper than paying monthly as many insurers have frequency loadings for monthly payments (up to 7%). If income premiums are tax deductible in your country ensure that you remember to claim your income protection premiums as a deduction – we have seen a number of individuals who have forgotten to do this.

Remember if it is hard to live with an income how hard would it be without one – act today and call your insurance adviser and protect your most valuable asset.

When each driver involved in an accident are fully insured, then covering the cost of the damages usually is straightforward. However, in many cases, one or both of the drivers are underinsured, or not insured at all. Underinsured means that the driver has insurance, but it is not sufficient to cover all costs involved in the accident. An uninsured driver is someone who is operating their vehicle without any insurance at all. Although it is against the law to drive in either of these conditions, many people do anyway, and the amount of accidents involving insufficient insurance is increasing every year.

A driver who is involved in a car crash with a driver who has no insurance or has insufficient insurance, then their insurance company would cover the costs if the driver had included uninsured/underinsured motorist coverage in their insurance policy. This takes care of medical expenses, property damage, and other compensatory damages. An insurance policy that includes uninsured motorist coverage can also play an important role in cases or injuries that are due to a hit-and-run car accidents. Uninsured/underinsured motorist coverage can also be utilized if a pedestrian is hit by a motor vehicle.

It is extremely risky to drive without insurance or without proper insurance, so always be sure that your insurance is up to date and covers all of your motor vehicles’ needs. If you have proper insurance, then your insurance company should cover the costs of an accident in the case that you are at fault. If the other driver is at fault, then their insurance should pay. However, in the case that the other driver does not have insurance or their insurance isn’t sufficient, it is wise to have an insurance plan that covers you even if you are hit by someone without insurance.

Even though a driver has the right to take legal action against an underinsured or uninsured motorist, if their insurance does not cover uninsured/underinsured motorist coverage,they are not guaranteed money because the other person involved in the accident may not have the assets to pay for the judgement. For this reason, having uninsured or underinsured motorist coverage in your insurance policy is a good idea.

If you have suffered injuries from an automobile accident, it is possible that you will have a successful legal case. If you would like to contact a lawyer, please use the Find Attorney button at the top of the page.

As elementary as it may sound, no matter how much money you make, you still need to find ways to hold onto it. There are many small steps to take that will add up to big savings in the end. If you value the assets you have accumulated, or if you feel you should be accumulating more, take this advice and make some minor changes.

Firstly, take a look at your life insurance policy. If you have no children or grown children or if you are no longer married, then you make want to reassess your need for life insurance. The whole purpose of a life insurance policy is to safeguard the people you are leaving behind such as spouses and children. If you have no spouse and your children are self-sufficient, it is unnecessary.

Keep your car. You paid it off, you deserve it! Most people feel that once the car loan is paid, they need to go ahead a get a new car with a new car payment. It is wise to keep the car you now own for at least a few more years, ideally three or four. Smart savers will even bank the money they were using for their car payment since they are used to paying it monthly. In a high interest savings account, that money will grow before your eyes.

Pay off the plastic! High credit card balances are the downfall for many consumers. With huge interest rates averaging 15%, large balances will steal your potential savings. One solution is to shop around for a better rate. Many credit card companies will offer a lower interest rate for balance transfers. Simply locate the card with the lowest interest and transfer your big balance. One important thing to remember is that paying down that card will save you lots of money in the long run. It is simple, the longer it takes to pay down the balance, the more interest will fly out of your pocket. What good is paying interest for you? No good at all. By paying interest you are shelling out money to the credit card company because of poor planning in paying off the balance so make those payments!

Yet another way to save your earnings is to raise your homeowners and car insurance deductibles. Although it is wise to consider how much you will need to dish out in the case of a claim, a higher deductible will save you money on your monthly payments. Look at it this way, a monthly payment is a guarantee, but a claim is not. As always, stay cautious and never think that you are exempt from claims, but raise that deductible anyway. In the case that you must file a claim, a $1000 deductible will hurt more than $500, but you can save up to 20% yearly in monthly payments by hiking that deductible.

We have feelings about the GAP insurance in some ways. First, we have those who swear that they bought, and fortunately never used. And there are those who have been declared in a situation where their car was a total loss. And people had to find a way to pay a difference in the bank back. Rather difficult dilemma, but I hope that after I got a little ‘light in this option of insurance, there is only a valid and reasonableChoice.

The CAP is an acronym for “Guaranteed Auto Protection. Self-explanatory, but sometimes confusing when people say vaguely. Okay, back to the definition of injustice or call negative equity, as the most common. It’s when someone owes more to the bank, as is what the current market value of the property. And this asset class can be cars, boats, campers, motorcycles, goods, which has a constant value of depreciation daily. As CAP is for consumers, is realeasy. In fact, you look like a safety net in case if something happens to your depreciable asset, whatever may be the case that the GAP insurance is the difference between what is owed and what your insurance covers the ‘insurance longer pay an allowance of up to $ 1,000. And for those who financed leased by us or have a car to sink without some kind of action that they know exactly what I mean. And statistically speaking, about 75% of consumers in a negativeEquity position. In reality, very scary!  read more http://www.insurancemotorcycle.equitylinesite.com/2010/03/06/auto-gap-insurance-it-really-necessary-or-is-a-waste-of-money/

The younger you purchase a policy the more likely that you will pay less, not only in the short term, but over the course of your life.  If you have a policy and pay the premiums, you are guaranteed coverage for life.  An important concern with these polices is the ability to continue to afford the policy both today and into retirement, so dealing with a company that specializes in long term care can be very beneficial.

The opportunity to purchase long term care insurance can be limiting.  There are several medical conditions that disqualify individuals from obtaining this type of coverage.  Most experts advise their clients to start investigating long term care insurance plans in their early 50’s.  Today, the average age of a person buying long term care insurance is 57.  At age 50 the premiums for long term care insurance typically increase at a rate of 5-8% per year.  As a person ages, the likelihood of not qualifying for long term care increases; as an example, a 65-year-old has a 25 percent chance of not being eligible for long term care insurance.

Long term care insurance can help protect a family.  If there are assets to protect, the family should take the time to visit with a long term care insurance specialist.

Ask yourself, how will you pay for a long term care event that costs $30,000 to $100,000 per year?  What would that do to your families assets?  Who would be your caregiver and can they afford to take the time to care for you?  Many people, after looking at the statistics and the costs associated with such an event, realize the importance of such a policy sooner rather than later.

There can be several advantages for business owners.  In addition to asset protection, business owners of all sizes have the opportunity to receive tax deductions on their personal taxes by purchasing long term care policies.  Long Term Care Insurance is considered health insurance and taxed the same way with limitations on deductibility based on age.  We encourage you to sit down with your CPA and talk about all of the tax incentives of this product.

Most companies provide payment options that allow you to pay off your policy.  There is typically a “10-pay” option that usually costs four times the annual premium, but after 10 years, the policy is paid-off.  Another option is a “pay to age 65.”  This is a great option if you want to pay the plan off by the time you retire or if you are a business owner, this can be used as an incentive to keep a key employee.  The cost of the “pay to 65” plans varies based on attained age.  Either of these plans “10-pay” and “pay to 65” allow you to pay the policy off early versus until benefits are used or deceased.  Once the policy is paid-off the insurance companies can not increase your premiums over time.

In summary, it is very important take the time to sit down with your loved ones and let them know your plan.  Will your plan consist of a long term care policy or will you tell them that “they are your plan!”

Ask the difficult questions:

-          Who will be the caregiver?

-          Do you want a choice on where you will receive care?

-          What assets do you want to leave your children?

-          Can I afford to wait to buy this policy?

-          Have you talked with friends that have experienced a long term care situation personally?

Determine how many assets you would be willing to liquidate if you have a long term care event.  The fact is that approximately 50% of us will at some point need long term care.  Remember, if you do not have a long term care insurance policy your choice is to pay for the care out of your own assets and self-insure.

Tom Lothrop

Western Long Term Care, LLC

Long-term care insurance can help defray the costs of a nursing facility, home care, or other paid long-term care for your parents — or for you. Because the older you get, the more expensive the premiums, people usually buy long-term care insurance in their 50s or 60s, which means it may be more relevant to look into it for yourself than for your elder parents. But it may still be affordable and available for your parents if they’re in their 70s, depending on their health history.

A policy with poor terms and coverage is a waste of money. So, if your parents are going to buy this insurance, be certain they get a policy from a reputable company, and make sure it has good provisions regarding premium raises, types of coverage, inflation protection, and coverage eligibility and exclusions.

Once you and your parents have narrowed your choice to a few policies, you can use the long-term care insurance buyer’s worksheet to compare policy terms and conditions side by side.

Long-term care insurance basics

Here’s a quick summary of the basics, pro and con, regarding long-term care insurance:

Best For

· People with liquid assets between $200,000 and $1,500,000
· Those who don’t have extended family who are willing and able to provide unpaid long-term care
· People who will have enough retirement income to cover premium payments

Not So Good For

· People with less than $200,000 liquid assets
· People whose retirement income may not be able to keep up with premium payments

Look For

· Controlled premium hikes
· Inflation protection
· Highly-rated insurance company

Watch Out For

· Policy conditions that make it difficult to qualify for benefits
· Coverage exclusions
· Unwritten promises by insurance broker

Tip

Unless your parents are first buying long-term care insurance in their late 70s or early 80s, they’re not likely to qualify for the benefits for at least 10 and perhaps 20 or more years. So, in every aspect of choosing a policy, you need to consider what their financial capabilities will be over the course of that time. That is, they shouldn’t buy a policy whose premium will become too high for them to pay down the road.

You also need to consider what the cost of care is likely to be later, not now. That means buying a policy with good inflation protection.

How to begin searching for a long-term care insurance policy

Like any insurance, a long-term care policy is a financial gamble: A buyer bets years of premiums against the likelihood of a long stretch of expensive long-term care. If your parents decide to take the gamble, you need to make sure they get a policy with premiums they’ll be able to afford for many years to come — and one that will pay substantial benefits if and when they need care. Here’s what to consider when shopping for a policy.

You have three basic options:

Insurance agents or brokers
Large private or government employers (if either of your parents has worked for such an employer — and, in some cases, if you do)

Professional, labor, fraternal, or other nonprofit organizations

Insurance brokers or agents tend to be familiar with a limited number of long-term care insurance policies (ones they sell and perhaps some from direct competitors). So, while you may want to consult an insurance agent (who usually represents only one company) or a broker (not restricted to one company) about policies, don’t limit your search to only one.

Also, don’t rely on what an agent or broker tells you about how the policy works or what it covers. They usually don’t know the policies in much detail. Make sure you get an actual copy of any policy your parents are seriously considering. Look it over with your parents, and put in writing any questions you have. Get those questions answered in writing by a representative of the insurance company itself, not just in conversation with the agent or broker.

Large employers may offer long-term care insurance policies. Check with your parents’ previous and current employers to see if this is the case. If so, the prices may be a bit better than what you can find on the open market. But remember that the policy itself is from an insurance company, not the employer. So it’s equally important to thoroughly check out any employer-sponsored policy. Also, if either of your parents is a veteran, check with the Department of Veterans Affairs about its long-term care insurance program.

Professional, labor, fraternal, or other nonprofit organizations may also offer long-term care insurance policies. If either parent belongs to any such organization, find out if it sponsors group policies. If so, the organization’s buying power may result in a better price than your parents could get for a similar policy they purchased as individuals.

Group policies offer slightly lower initial premiums, the result of the group’s buying power. But they also harbor potential disadvantages. Over the years, the group will negotiate with the insurance company regarding premiums. The group might favor younger workers over retirees, negotiating lower premiums for new policyholders and steep premium hikes for existing policyholders. Or the group might one day cancel the arrangement altogether, transforming the group policy to an individual one with much higher premiums.

How to check on an insurance company’s reliability

Your parents aren’t likely to collect on their policy for 10, 20, or 30 years, and if the company that issued the policy goes belly-up in the meantime, your parents will be left holding a very expensive but worthless piece of paper. There’s no way to guarantee that an insurance company will still be in business when your parents are ready to collect policy benefits years from now. But you can at least make sure that a company is in good financial shape for the foreseeable future by checking its financial ratings with Moody’s Investors Service or Standard & Poor’s insurance rating services.

You also want the policy to come from a company that has a track record of honoring long-term care benefit claims. Check on the company’s record of complaints with your state government’s department of insurance. You can find contact information for your state’s insurance department by going to the home page of your state government and searching on Department of Insurance or Insurance Commission. If a company has a steady pattern of complaints, you should look for a different company.

Special advantages to look for in a long-term care insurance policy

Some broad categories of policies offer certain advantages beyond their coverage and benefits.

Qualified Long Term Care Insurance (QLTCI): One type of long-term care insurance offers the advantage of a double tax break. Premiums paid for these QLTCI policies can, under certain conditions, be deducted from federal income as an itemized medical expense. The deductible amount depends on the insured’s age. The other part of the tax break is that benefits paid under a QLTCI policy are not taxed as income. Since a policy might pay upwards of $30,000 per year in benefits, this could be a big savings.

State partnership policies: State partnership long term care insurance policies are available in eight states: California, Connecticut, Florida, Idaho, Indiana, Kansas, Nebraska, and New York. They are connected to Medicaid, which can pay the full cost of a long-term nursing facility or home care. Medicaid allows a beneficiary only very limited income and assets, however. With a state partnership policy, your parents could keep considerably more assets and still qualify for Medicaid coverage of long-term care costs that insurance doesn’t pay.

How initial premium amounts are set
In general, a long-term care insurance policy’s premium amount depends on several factors, which are determined by the insurance company’s own formula. But your parents can control some of these factors by the choices they make. Factors include:

Age. The older your parents are, the higher the premium.

Health. Prior or existing health conditions can raise premiums; these conditions are revealed during underwriting, which may include both an examination of your parents’ medical records and a physical exam by an insurance company doctor.

Coverage. The more types of care the policy covers, the higher the premium.

Benefit amount and duration. The higher or longer the benefit, the higher the premium.
Inflation protection. Benefits that increase with inflation are a crucial part of a good policy but may add to its cost.

Waiting period before benefits begin. The shorter the waiting period, the higher the premiums.

Miscellaneous provisions. Provisions that allow premium reduction or cashing-out of the policy may affect initial premiums.

Shop around. Remember that for virtually the exact same policy, different companies might charge your parents widely different premiums.

Locking in long-term care insurance premiums over time

Except for “attained age” policies (see below), an individual’s premiums won’t go up just because he gets older. But while individuals aren’t singled out for premium increases, an insurance company can and will raise premiums across the board for everyone who holds a similar policy.

How much premiums go up over time may determine whether the policy will still be affordable for your parents 15 to 30 years from now. That’s why it’s important to understand how companies set up premium raises and, if possible, to pick a policy with favorable terms.

Level premiums are the best type of premium increase provision. The insurance company will only increase premiums by the same percentage for everyone holding the same policy. For this type of premium raise, an insurance company needs approval from the state insurance commission. This provides some protection against frequent or dramatic premium increases.

Attained-age premiums increase every time the insured reaches a certain age benchmark: 70, 75, 80 years, and so on. If an attained-age policy spells out how much the premiums will rise at each attained age, it offers some predictability. You can do the math and figure out whether those amounts seem like they’ll still be affordable 10 to 30 years out. Avoid a policy that says premiums will increase at various age benchmarks but fails to spell out by how much.

Issue-age premiums, which are less common than the other types, use the age at which your parents first buy the policy as the basis for premium increases. Let’s say one parent buys a policy at age 65. From then on, your parent pays the same amount as anyone who first buys the same policy at age 65 — no matter what age your parent reaches. The premium steadily increases as the cost of insurance does, but market forces provide some limit on how much it will go up, since the company will always want its rate to look attractive to new 65-year-old buyers. This is a risky kind of policy term.

Be prepared for premium hikes. During the first two decades, when long-term care insurance was first being offered, policyholders forfeited about half of all policies because they were unable to keep up with rising premiums. So, unless you’re certain what a policy says about the circumstances under which its premiums can be raised, your parents shouldn’t buy it.

Premium payments once your parents start collecting benefits

A policy term called a “premium waiver” allows your parents to stop paying premiums after collecting benefits for a certain period — usually 30 to 90 days. A few policies allow an immediate premium waiver. Be aware, though, that some premium waiver provisions apply to collecting nursing facility benefits but not to home care. Usually, a more generous premium waiver provision means slightly higher initial premiums.

Types of care coverage available

Some policies routinely include coverage for several types of care. Others charge extra for different types of coverage. Here are the types of care covered, and the situations under which your parents might consider them:

Nursing homes. As part of standard terms, all policies offer nursing home coverage. This is the most expensive care — other than 24-hour home care — and the type that concerns most people. Still, it’s possible that your parents might never need nursing home coverage and, if so, could save a lot of money by limiting coverage to other types of care. This could be the case if one of your parents has a younger, healthy spouse who can serve as a primary home caregiver and many nearby family members are willing and able to commit themselves to help care for your parent at home. If so, your parents might choose to buy coverage for home care but not for a nursing home for one of them, and broader coverage for the other.

Assisted living communities. Assisted living, in which elders maintain their own private living space in a group setting, is for those who need some assistance and monitoring but not at the level of care a nursing home provides. Many policies now include assisted living coverage as standard, but many others charge higher premiums for it.

Home and community care. Including home care in a policy can make the difference between your parents staying at home — theirs, yours, or another family member’s — or having to move into a nursing home. As their needs grow, paid home care can allow them to live with family but not place the entire burden of care on family members.

Some policies also include coverage for community care, which usually means adult daycare. This is nonresidential care during “office hours” at a senior center-type facility. It can help allow your parents to live in a family member’s home by relieving the family from care duties during the daytime.

Independent, nonagency home care. Home care from a state-certified agency is covered by any long-term care insurance policy that includes home care. But many people find that independent, nonagency home care aides provide more flexible, more consistent, and far less expensive home care than aides provided through a home care agency. To take advantage of independent — even unlicensed — home care, a policy’s home care coverage should not be limited to state-certified home care agencies.

How much benefits coverage your parents need

Most long-term care insurance policies pay a set daily benefit amount, usually twice as much for nursing home care as for home care, while benefits for assisted living are usually somewhere in between. What’s the right amount for your parent?
There’s little point buying a policy if the benefits would only make a small dent in long-term care costs. The minimum should be:

· $100 per day for nursing facility care
· $50 per day for home care

Amounts nearer to $200 per day for nursing home care and $100 per day for home care are more comfortable figures, but this benefit level means higher premiums. Those who can afford the higher premiums choose $300 per day for nursing home care and $150 a day for home care. At that level, benefits would cover $110,00 a year for nursing home costs and $55,000 for home care, which is close to the full cost of care currently available in many areas of the country (and significantly higher than average costs in others).
Inflation protection. Whatever level of benefits your parents wind up buying, make certain that the policy contains inflation protection. Without it, the policy your parents buy today may be next to worthless when they’re ready to collect on it.

The benefits of inflation protection

Inflation protection is a highly recommended feature. Why? Let’s say that at age 65, your parents buy a long-term care insurance policy with a flat benefit of $200 per day for nursing facility care and $100 per day for home care (and we’ll assume that these numbers reflect the cost of care in the area where they live). The problem is that the cost of care won’t be anywhere near those amounts 15 or 20 years later, when your parents are likely to collect on the policy. Every year, the cost of healthcare goes up faster than the general cost of living. So, while a $200 daily benefit might cover nearly the full cost of a nursing facility now, in 20 years it might pay only 10 percent.

That’s where inflation protection comes in. This important provision increases the amount of your parents’ benefit over the years they keep the policy. In fact, many policies now include inflation protection as a standard policy term. With other policies, you have to pay a higher premium for it. Either way, make sure the policy includes it.

Most policies place a time limit on inflation protection, usually 10 to 25 years from the date the policy was first purchased. Other policies stop the benefit increases when your parents reach a certain age, usually 80 or 85. Look for the longest period of inflation protection, especially if your parents are relatively young when first buying a policy.

Best types of inflation protection

Inflation protection comes in several forms:

Compounding automatic increase. This is the best kind of inflation protection. It automatically increases benefits each year, by a percentage set in the policy. Also, it has a compounding effect, using each year’s increased benefit amount as the base for calculating the next year’s increase.

Simple automatic increase. This type of inflation protection automatically increases the benefit amount each year by a set percentage but it uses the policy’s original benefit amount to calculate this increase. Over the life of the policy, this increases benefits far less than a compounding increase would.

Added coverage purchase. This is a very poor cousin to automatic increases. It allows you to increase the benefits every few years — by paying more. Unless there’s a guarantee about what this added coverage would cost, it might not be affordable. This is a gamble to avoid, if possible.

How long a benefit period your parents should buy

Once you’ve decided how much in daily benefits your parents will need and can afford, the question becomes how long the benefit period should last: One year? Three years? Five? The longer the period of coverage, of course, the higher the premium.
Limiting benefits to a year probably isn’t worth the cost of the policy. Buying coverage for more than six years of nursing home care is generally unnecessary and usually unaffordable. Three to five years of nursing home care is what most people choose and, statistically, what’s most appropriate. Whether you choose three, four, or five years depends on what you think is affordable now and in the future.

Flexible payout versus payout only for specific types of care

Because you can’t be sure whether your parents will need care at home or in a nursing home — or some combination of the two — it’s best to find a policy with a flexible payout. This combines the policy’s maximum total benefits for home and nursing facility care into a single coverage pool of money. Your parents can then use this benefits pool in whatever combination of home care and nursing home care is needed.

Buying a joint long-term care insurance policy for both parents

Most long-term care insurance companies offer “share-care” policies for couples. With these policies, the total amount of coverage is pooled between the two. If one parent dies without having used up all his policy benefits, the survivor gets those unused benefits added to the remaining policy.

This type of shared policy makes a lot of sense because women tend to live longer than men, and so they usually need longer periods of paid care. Share-care policies cost more than two individual policies, but they’re a particularly good idea if either of your parents living alone would likely depend mostly on paid care, or if one of your parents is quite a bit younger than the other.

Hidden coverage exclusions you should know about that might prevent benefits from being paid

During the first decades in which these policies were sold, many long-term care insurance policy holders never saw a dime in benefits. A major reason was that many policies had coverage exclusions — buried in the policy’s text, obscured by insurance lingo — that blocked people from getting their benefits. Policies have fewer of these exclusions now. But they still exist, so it’s important to keep an eye out for the following:

Prior hospital or skilled nursing facility stay requirement. This can be a disastrous policy provision. Many early long-term care insurance policies would not pay benefits unless the long-term care followed — usually within 7 to 30 days — a stay of at least three days in a hospital or a skilled nursing facility. But many people need long-term care because of increasing frailty, chronic illness, dementia, or Alzheimer’s, which do not necessarily lead first to hospitalization or skilled nursing facility care. With a prior hospitalization requirement, these people would be completely out of luck. Most states have outlawed these exclusions, but they’re still legal in about a quarter of states, so keep a sharp eye out for such a policy provision and avoid it at all costs.

Permanent exclusion for certain conditions. Most long-term care insurance policies permanently exclude coverage — meaning no benefits will ever be paid — for care that’s necessitated by certain conditions, the most common being drug or alcohol abuse and HIV-related illness. But some policies also permanently exclude coverage for mental illness, Alzheimer’s, certain forms of heart disease, and certain forms of cancer or diabetes. Be very careful not to buy a policy that excludes coverage that results from any of these common conditions.

Preexisting conditions. Many long-term care insurance policies have an exclusion period for care related to an illness or condition that a parent had before buying the policy. This means that for a certain period after long-term care has begun, the policy pays no benefits for that condition. A relatively short exclusion period — one to three months — is acceptable, but avoid any exclusion period of more than six months.
Elimination or waiting period. Elimination or waiting periods refer to a timeframe — from ten days up to a year — immediately after your parents qualify for benefits during which the policy doesn’t pay anything. The longer the waiting period, the lower the premiums — for example, a waiting period of six months could reduce your parents’ premiums by a third. The younger your parents are when buying a policy, the more sense it makes to trade a longer elimination period for a reduction in premiums.

When benefits payments will kick in

To begin collecting benefits, an insured individual has to meet certain conditions, called the benefit trigger. The conditions usually have to be certified by a doctor. A good policy allows this certification to be made by your affected parent’s doctor, though the insurance company may have its own doctor check this determination. There are two different ways a policy might define the benefit trigger:

Activities of daily living (ADLs). Most policies use ADLs to determine when someone qualifies for benefits. Each policy includes its own list of five to seven ADLs, and your parents must need assistance with a certain number of them to trigger benefits:

· Bathing
· Eating
· Dressing
· Using the toilet (“toileting”)
· Walking
· Getting in/out of bed/chair (“transferring”)
· Taking medications
· Remaining continent

Some policies require that a parent need help with two ADLs; others require three. Some have different qualifying numbers for home care than for nursing facility care.
In choosing a policy that uses ADLs as its benefit trigger, make sure of a few key points:
Bathing and dressing must be included in a policy’s list of ADLs — these are almost always the first tasks that someone needs help with.

Be sure that benefits are paid if acognitive impairment (such as Alzheimer’s or dementia) prevents the covered parent from performing the required number of ADLs, even if he is physically able to perform them.

Be sure that the policy doesn’t consider your parent able to perform an ADL just because sometimes he can manage it.

Medically necessary due to illness or injury. A few policies require a doctor to certify that the affected parent’s need for care is due to an illness or injury, and that care is “medically necessary” — meaning it’s needed to prevent the illness or injury from worsening. This trigger excludes frailty or weakness and can be a very difficult standard to meet. Avoid any policy with this benefit trigger.

If premium payments become unaffordable

Some policies have extra provisions that provide some refund protection if, years down the road, your parents can’t keep paying the higher policy premiums. A good refund provision can make one policy more attractive than a similar alternative. There are several types of refund provisions:

“Step-down” provision. This allows your parents to lower their premiums in exchange for a lower benefit amount or a shorter benefit period.

Nonforfeiture provision. The term nonforfeiture is a bit misleading. It doesn’t prevent forfeiture of the policy’s benefits, but it does provide a small refund if your parents drop their coverage before collecting benefits. If your parents have paid premiums for a minimum number of years (usually 15 or 20) and then can no longer afford the premiums, this provision will refund a small percentage of the total payments.
Reduced paid-up provision. This allows your parents to drop the policy — that is, stop paying premiums — after a set amount of time (20 or 25 years) but still collect a reduced benefit amount if and when they qualify for benefits.

Death refund. This provides a small refund to your parents’ estate if they die before a certain age (usually 65, 70, or 75).

Survivorship provision. If both your parents buy a single long-term care insurance policy, this provision allows your surviving parent to stop paying premiums a certain number of years after your other parent’s death, with the policy remaining in force.