Life & Long-term Care Insurance

Are you prepared for or concerned about?

• Income to pay your bills when out of work for surgery, illness or other extended circumstances; or
• Paying for burial and other final expenses; or
• Loss of income with departure of spouse; or
• Stability in retirement?

Let us help you select life insurance coverage that meets your needs, your life and your budget. There are many types of life insurance to fit individual needs and circumstances. How much life insurance do I need? In most cases, if you have no dependents and have enough money to pay your final expense, you don’t need any life insurance.

Disability Insurance – Disability insurance pays an insured person an income when that person is unable to work because of an accident or illness.

Long term care – Because of old age, mental or physical illness, or injury, some people find themselves in need of help with eating, bathing, dressing and other physical activities.

Final Expense (also known as basic burial insurance) – Final expense insurance is one of the greatest gifts you can provide for your loved ones. Providing your family with the money needed to cover your final expenses is something that simply makes sense.

Annuity – In its most general sense, an annuity is an agreement for one person or organization to pya another a stream or series of payments (income). Usually the term “annuity” relates to a contract between you and a life insurance company, but a charity or a trust can take the place of the insurance company.

Life Insurance – What are the principal types of life insurance?

There are two major types of life insurance—term and whole life. Whole life is sometimes called permanent life insurance, and it encompasses several subcategories, including traditional whole life, universal life, variable life and variable universal life. In 2003, about 6.4 million individual life insurance policies bought were term and about 7.1 million were whole life.

Life insurance products for groups are different from life insurance sold to individuals. The information below focuses on life insurance sold to individuals.

Term Insurance

There are several different types of term insurance you can consider:

• Renewable Term Insurance
• Convertible Term Insurance
• Level Term Insurance
• Decreasing Term Insurance
• Increasing Term Insurance

Term Insurance is the simplest form of life insurance. It pays only if death occurs during the term of the policy, which is usually from one to 30 years. Most term policies have no other benefit provisions.

There are two basic types of term life insurance policies—level term and decreasing term.

Level term means that the death benefit stays the same throughout the duration of the policy.

Decreasing term means that the death benefit drops, usually in one-year increments, over the course of the policy’s term. In 2003, virtually all (97 percent) of the term life insurance bought was level term.

Whole We / Permanent Insurance

There are six basic types of permanent insurance:

• Whole Life
• Joint Whole Life
• Survivorship Life
• Universal Life
• Variable Life
• Variable Universal

Whole life or permanent insurance pays a death benefit whenever you die—even if you live to 100 There are three major types of whole life or permanent life insurance—traditional whole life, universal life, and variable universal life, and there are variations within each type.

In the case of traditional whole life, both the death benefit and the premium are designed to stay the same (level) throughout the life of the policy. The cost per $1,000 of benefit increases as the insured person ages, and it obviously gets very high when the insured lives to 80 and beyond. The insurance company could charge a premium that increases each year, but that would make it very hard for most people to afford life insurance at advanced ages. So the company keeps the premium level by charging a premium that, in the early years, is higher than what’s needed to pay claims, investing that money, and then using it to supplement the level premium to help pay the cost of life insurance for older people.

By law, when these “overpayments” reach a certain amount, they must be available to the policyowner as a cash value if he or she decides not to continue with the original plan. The cash value is an alternative, not an additional, benefit under the policy.

In the 1970s and 1980s, life insurance companies introduced two variations on the traditional whole life product—universal life insurance and variable universal life insurance.

What is Long Term Care Insurance?

Because of old age, mental or physical illness, or injury, some people find themselves in need of help with eating, bathing, dressing, toileting or continence, and/or transferring (e.g., getting out of a chair or out of bed). These six actions are called Activities of Daily Living-sometimes referred to as ADLs. In general, if you can’t do two or more of these activities, or if you have a cognitive impairment, you are said to need “long-term care.”

Long-term care isn’t a very helpful name for this type of situation because, for one thing, it might not last for a long time.

Some people who need ADL services might need them only for a few months or less.

Many people think that long-term care is provided exclusively in a nursing home. It can be, but it can also be provided in an adult day care center, an assisted living facility, or at home.

Assistance with ADLs, called “custodial care,” may be provided in the same place as (and therefore is sometimes confused with) “skilled care.” Skilled care means medical, nursing, or rehabilitative services, including help taking medicine, undergoing testing (e.g. blood pressure), or other similar services. This distinction is important because Medicare and most private health insurance pays only for skilled care-not custodial care.

Should I buy long-term care insurance?

If you need long-term care services and have to pay to obtain them, what financial resources could you call on? Do you have enough to pay for four or more years in a nursing home, an assisted living facility, or home health care?

If you’re over 65, don’t rely on Medicare or private health insurance. Medicare doesn’t pay for custodial care, and private health insurance rarely pays any of the cost of long¬term care.

If you expect to have very little money when you need long¬term care services, you might qualify for Medicaid, a government program that pays the medical and long-term care expenses of poor people. If you expect to be in that situation, you probably shouldn’t buy long-term care insurance, because your state’s Medicaid program will pay your long-term care expenses. Buying long-term care insurance would only save the state, not you, money. The exception is if you live in California, Connecticut, Indiana, or New York, states that have a Partnership for Long-Term Care program. For residents of these four states, buying long-term care insurance does offer an additional benefit.

If you expect to have a lot of money when you need long-term care services, you also probably shouldn’t buy long-term care insurance. Instead, you should plan to pay for the care “out of pocket”? that is, as a regular expense. One financial advisor suggested in a newspaper interview that if your net worth is in the $1.5 million range, not including the value of your home, you could safely skip buying long-term care insurance and treat long-term care expenses, if they arise, as you do your other bills.

If you fall in-between these two categories, owning long-term care insurance, like all other insurance coverages, offers peace-of- mind benefits as well as financial ones. For example, a recent survey of people age 50 and over asked how confident they were that they could pay for long-term care services if they needed them. Among those with long¬term care policies, 52 percent said they were very confident and another 40 percent said they were somewhat confident.

Among those who didn’t own a long-term care policy, only 8 percent were very confident and only 27 percent were somewhat confident.

But if you’re under 85, and especially if you’re under 65, that doesn’t mean you should ignore the topic of long-term care insurance because:

You might already be unable to buy long-term care insurance. Wakely Consulting Group, an actuarial firm, studied applicants for long-term care insurance in 2003-2004; the findings: 11 percent of applicants in their 50s, 19 percent in their 60s and 43 percent in their 70s were rejected.

A Milliman & Robertson actuary estimated that 15 to 25 percent of the over-65 age group are uninsurable for long¬term care.

A report from the Henry J. Kaiser Foundation indicates that over five million people ages 18-64 need some type of long¬term care.

The latest data from the National Center for Health Statistics (for 1999) reported that roughly 160,000 of the people living in nursing homes were under age 65 (nearly 10 percent of the total). Of those receiving home health care services, roughly 400,000 were under 65 (about 30 percent of the total).

So, unless you have so little money that you will qualify for Medicaid, or so much money that you can pay the bills out of your own pocket, you should consider buying long-term care insurance.