Overwhelmed with Choices
Let's talk about Thelma. She is a teacher. Almost two decades ago she was confused by all the information coming at her from all sources. Long Term Care was a big concern in the early 2000's. Her mailbox was full with sales pitches. Magazines targeting seniors were writing articles about how to plan for that day when you can't car for your self. Financial experts were writing and speaking out about the need to plan. Many organizations including Thelma's own CalPERS was coming to the school where she worked and selling Long Term Care Insurance. She had a friend who purchased a policy with the "Christian Science Rider" because her friend's religion was focused on spiritual healing and Long Term Care Insurance is a medical disability policy.
The Decision Is Made
Thelma had no personal experience with Long Term Care, other than her mother in law who voluntarily gave up driving at age 96 and ended up in care from age 98 until she passed away at 101. Still, it was obvious to Thelma that now or in retirement she would not have the money needed to pay the $6,000 to $15,000 per month it would take to pay for her care when she needed it. She read about the California Partnership for Long term care policies, she looked into the Christian Science Plan her friend had, she finally settled on a $120 per day policy. When buying LTC insurance, you buy the daily benefit and then pick how many years it will last. Thelma chose $120/day for a three year period with a compound interest benefit increase.
Long Term Care Decision: Part 2
After choosing a benefit plan - $120 per day, three years, compound interest benefit increases - there were still decisions to make. Not every company offers every plan. Further, some companies had histories of rate increases on existing policyholders and some did not. By the time Thelma got down to choosing an insurance company, several companies had stopped selling LTC insurance for good. It seems many companies including the one with the Christian Science Rider had failed to adequately consider the cost of claims many years after setting the price on LTC policies. Thelma chose a policy with a company that was very big with lots of underwriting experience. Her LTC insurance policy was issued after she had a paramedical exam in her home and after the company received copies of her medical records from her doctor. Her monthly premium was an affordable $153 per month
News You Don't Want to Hear
Thelma was diagnosed with moderate to sever cognitive impairment (dementia) when she was almost 79 years old. In the years leading up to the diagnosis, she had stopped driving at night, She missed her mortgage payment and was having trouble remembering how to cook. The family asked her family doctor who referred her to a neurologist. The dementia diagnosis was made and within two weeks the DMV asked her to give up her driver's license.
In different times and different cultures, Thelma would move in with her kids or they with her. Family would take care of her as she lived out her days slowly losing herself and her memories. Over the years she will forget how to brush her teeth, maybe how to eat, or talk. There is no place for her to go to be with family. One adult child is near retirement and would have to cut her own career short to take care of mom. She would reduce her own retirement for decades to come. Another adult child is working constantly. To Thelma in to his home would mean hiring in-home care which costs as much as 3 times what the shared expenses of a facility run. She has to move to an assisted living/memory care facility. In her home state of California, these are licensed as Residential Care Facilities for the Elderly. Expenses incurred for this type of care are covered in Thelma's Comprehensive Long Term Care Policy.
Long Term Care Insurance Math
Thelma took out a Long Term Care Insurance policy about 12 years ago and paid $153 monthly for it. When her plan of care was approved by the Insurance company her family was notified that the benefits payable for her care was pool of money just under $250,000. Her facility is charging about $4,000 per month for 24 hour room, board and assisted living care. At that rate she will have about 5 years of care covered, Nothing in this post is good news except for the obvious fact that over 12 years Thelma paid about $22,000 and we she had cognitive impairment there was over $248,000 available for her care.
Change Is The Only Constant
Thelma is not her name, but this is a true story that is still being written as "Thelma" slowly deteriorates mentally and now, unfortunately, physically. Monson Insurance has substantial experience in every aspect of planning for Long Term Care and Medicare Plans. We've been there when claims were paid. Long Term Care Planning has evolved. Policies like the one discussed here are not necessarily available now. There are asset based plans that aren't as risky for you or the insurer. Call or email us for a discussion of this topic to see if it's appropriate for you.