One size does not fit all.
That bit of common sense seems to fly out the window when anyone starts commenting on how to "fix" anything, especially, complicated, dynamic problems like financial planning, retirement planning, investing and insurance. A new opinion about how to make LTC insurance cheaper and more effective is getting widespread attention thanks to an editor at the Wall Street Journal.
Quoting from a column in Financial Planning magazine, Glenn Ruffenach (who I know, respect, and who has quoted me several times) writes:
"...a policy with a two- or three-year elimination period — and benefits that subsequently cover as much as five or 10 years of care, if needed — would be more effective, [the author] says.
"'With an elimination period that high, even the average stay in a nursing home will fall within the deductible period; the actual probability of ever having a material claim against the long-term care insurance would fall dramatically,' [the author] says. 'That’s good, as it means the cost of coverage could fall significantly, while policies could simultaneously have richer benefits (after the elimination period) and do a better job of insuring against extreme events when they occur.'"
There are two significant errors in this concept:
While it is true that LTC insurance is less expensive with a longer Elimination Period - essentially creating a "higher deductible". And the advice that the EP should be two to three years is also reasonable IF the client can financially - and wants to - self-insure that much care out of pocket to have even longer benefits after that time. While not common, there are LTC plans available with extra-long EPs.
But many clients remain well-served by the typical 30 to 90-day EP with total benefits lasting only three to four years. These shorter-benefit plans can be designed to provide guaranteed Medicaid asset protection in most states if there is a worst-case, very long care event. And many people rightly realize that long-term care planning with well-designed LTC insurance coverage is not about leaving money to heirs, but preserving income - and lifestyle - for others at the very beginning of a long-term care event.
Bottom line, what does a particular person or family need? Long deductible plans are available, but "normal" 90-day plans remain financially viable for many.
Read the WSJ article by clicking here:
You can also find it by clicking here to read it on MarketWatch.com:
The original article in Financial Planning magazine requires a subscription to view.
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