Suze Orman is brutally candid when it comes to why you and your family should think about long-term care (LTC) insurance. An event in Suze’s family taught her the hard way how much years of long-term care may cost. Despite the problems the LTC insurance industry has had over the years, she believes you should look into this type of coverage. Here’s a rundown of Suze Orman’s tough talk about long-term care insurance.
Suze was well aware of the high cost of long-term care, which is why she pleaded with her mother every year to allow Suze to purchase LTC coverage for her. She witnessed people squandering their life money on home health care or nursing home care. It’s especially terrible when one spouse’s expenses deplete the retirement savings, leaving the surviving spouse penniless.
Premiums for long-term care insurance have skyrocketed. A coverage that used to cost $2,000 a year could now cost $4,000 a year. Consider what you gain with that premium increase before you decide to drop LTC coverage.
On average, home health care will cost $4,000 per month. Nursing homes can cost upwards of $8,000 per month. The cost of a year’s LTC premium is less than a month’s worth of home health care or two weeks in a nursing home. Living in a nursing home for a year costs more than all of the payments a person would ever pay for long-term care insurance.
There is no reason to assume that the expense of home health care or long-term care will decrease in the decades ahead, when you or a loved one may require these services. If you choose not to purchase long-term care insurance and instead cross your fingers and hope for the best, you should be aware that the costs you may have to pay out of your retirement savings could be significantly higher than the current average costs of home health care and nursing homes.
Of course, if current trends continue, premiums will rise even more. Suze advises people to buy an LTC policy today only if they can afford to pay the premium even if it rises by 40% in the next few years.
You should not purchase an LTC policy if paying the premiums will prevent you from saving money for retirement. People who require home health care, nursing home care, or another type of covered long-term care are only eligible for LTC benefits. You have a much better chance of living to retirement age than you do of needing long-term care.
The provisions of this article’s general law may differ from the provisions of this article’s regulations. You should consult an elder law professional in your area to see if long-term care insurance is a good supplement to your estate plan. This is not an advertisement for long-term care insurance or any other type of insurance.
What type of insurance does Suze Orman recommend?
Suze Orman has devised a set of 12 wealth-building steps. In a nutshell, there are 12 important financial guidelines that are required for a successful financial life. Her recommendations include paying off debt and putting money aside for your children’s education. “Insuring your well-being” is the eighth step. Suze advises that if anyone is reliant on your income, you should purchase life insurance.
What Does Suze Recommend?
Suze Orman despises whole and universal life insurance plans, as everyone who has watched an episode of The Suze Orman Show or read one of her books knows. Suze argues that if whole or universal life insurance is viewed as a savings vehicle rather than just an insurance policy, the money invested in a whole or universal life insurance policy could generate a higher rate of return elsewhere.
Suze Orman is a huge proponent of term life insurance, and she believes that they are the finest policies to have. She maintains that term life insurance policies are less expensive than whole and/or universal life insurance policies, and that they are simply more cost effective. Suze further noted that many companies and insurance salespeople try to offer whole life or universal life insurance plans to consumers in order to increase their commissions.
Suze advises that you purchase term life insurance, adding that most people should choose a 20-year term policy. Suze Orman also recommends that your insurance coverage be 20 times your annual income. She cites the example of a 35-year-old woman earning $40,000 per year who should have $800,000 in coverage. Select-quote is also a good place to look for term insurance, according to her.
What if You Already Have Whole or Universal Life Insurance Policies?
Suze Orman typically advises clients who own whole or universal life insurance plans to cash them in and replace them with solid term life insurance policies.
Does AARP recommend long-term care insurance?
- Certain long-term care insurance policies underwritten by New York Life are endorsed by AARP. These measures are targeted specifically towards AARP members.
- Traditional, stand-alone, and hybrid long-term care insurance policies are available through AARP (which combine life insurance with long-term care benefits).
- Long-term care insurance policies from AARP are priced based on age, gender, health status, and coverage level.
- Long-term care insurance policies can be expensive, but AARP has a variety of coverage options to suit any budget.
It’s easy to assume that if AARP recommends something, it must be of high quality. To some extent, this is correct. AARP is unlikely to risk its good name by endorsing a substandard product. However, insurance is complicated, and long-term care insurance is no exception.
What happens to unused long-term care insurance?
The premium is not refunded in this type of policy, but the unused benefits are passed on to the other spouse. If one spouse’s benefits are exhausted, the other spouse’s policy benefits can be used. If one spouse dies, however, the survivor receives 100 percent of the unused benefits, despite the fact that their premium is no longer paid.
Is Federal long-term care insurance a good deal?
The FLTCIP is available to federal employees, military personnel, and their immediate family members.
Because the FLTCIP has a single price schedule based only on age, it is an excellent deal for most women, who have greater LTC expenditures and so incur higher rates from independent insurance carriers.
FLTCIP, on the other hand, is not subsidized by your agency; it does not provide a refund if the insurance is unused; and it does not provide a discount if you are in excellent health or may deny you entirely if you are in poor health.
As a result, men (and some women) can likely get coverage from an independent insurance carrier that is comparable to the FLTCIP, but at a cheaper cost.
Is 70 too old to buy long term care insurance?
There are no age requirements to acquire long term care insurance. While insurance firms may advise people to get policies as early as 40 years old, Consumer Reports advises people to wait until they are 60 years old. Waiting too long to purchase a policy can result in exorbitant premiums.
What life insurance is better whole or term?
- Term life insurance is “pure” insurance, whereas whole life insurance includes a cash value component that can be accessed at any time throughout your life.
- Term insurance protects you for a set number of years, whereas whole life insurance protects you for the rest of your lifeas long as you keep up with the premium payments.
- Whole life premiums can be five to fifteen times higher than term policies with the same death benefit, so they may not be a viable option for consumers on a tight budget.
Duration of Benefits
Long-term care (LTC) insurance is often purchased for a period of 12 months or more. You can purchase an insurance that pays benefits for one year, two years, three years, or five years. Benefits for as long as you live are no longer sold by companies.
The premium you pay is determined by the benefit package you choose for each year of LTC coverage you purchase, as well as your age, gender, and other factors. In general, the higher the policy premium, the longer the benefits will last. The majority of people strike a compromise between the amount of premium they can afford and the benefits they want to purchase.
Benefit Triggers
Certain parameters must be met before LTC insurance companies may pay payments. When you can’t accomplish a certain number of activities of daily living (ADLs), such as washing, dressing, or eating, or when you have a cognitive impairment or dementia caused by Alzheimer’s disease or other disorders, you’ll be eligible for benefits. These functional or cognitive impairments are determined by evaluating or testing a person’s ability to perform ADLs or cognitive abilities. Benefits may be granted if a person is unable to do a particular number of ADLs or has a cognitive impairment or dementia that need assistance or supervision.
When you can’t execute two of the ADLs stated in the policy, or you have a major cognitive impairment or dementia like Alzheimer’s, policies sold in California must pay approved benefits for nursing facility care, assisted living, and home care. Benefit triggers on older insurance may be different.
What age should you buy long-term care insurance?
According to the American Association for Long-Term Care Insurance, people over the age of 70 file more than 95% of long-term care insurance claims, and nearly 7 out of 10 claims are filed after age 81.
According to Genworth’s long-term care cost calculator, if you live in New Jersey and wait until you’re 70 to buy a policy that pays $250 per day for a private room in a nursing home for up to two years, your monthly premium will more than double (about 130 percent of the bill for someone buying at age 50).
If a man alone purchased a policy at the age of 50, the premium to receive $182,500 in covered benefits for a claim at the age of 79 the average age for filing a claim, according to the long-term care insurance group would be $56,278, based on a monthly premium of $161.72. Waiting until you’re 70 would cost you $370.88 every month.
When a woman isn’t in a relationship, she pays more at every stage of her life as little as $43 more per month at 50 and as much as $145 more at 70.
Couples of the same age, regardless of gender, have rates that are less than double those of a man alone.
And, despite the fact that a single New Jersey man’s total premium outlay from age 70 to 79 would be about $16,000 less, at $40,055, he risks being priced out of the market due to the higher premium. By waiting until they are 70, everyone increases their chances of being turned down for insurance due to poor health.
year window
According to financial consultants, the best age to shop for a long-term care policy is between 60 and 65, providing you’re still in excellent health and eligible for coverage. Couples may wish to look back five years.
“The ideal time to get long-term care insurance would be in your early 60s,” says Diahann Lassus, cofounder of New Providence, New Jersey-based wealth management firm Lassus Wherley. “If your health is OK and you don’t have hereditary problems that insurance companies don’t like, the ideal time to get long-term care insurance would be in your early 60s,” she says.
Why? You are neither too young nor too old. A winning mix of a still-affordable monthly premium and a total premium savings is a winning combo.
According to Genworth’s cost calculator, if a single man in New Jersey gets a long-term care policy at 60 instead of 50, his monthly premium will increase by only $35 per month, but he will save $11,540 in premiums through age 79. If he waits until he’s 65, his monthly premium will rise to $239.20, but his total premiums will drop by $4,552.
Is long-term care the same as long term disability?
Long-term disability insurance, both individual and group, covers your income, while long-term care insurance covers out-of-pocket payments for long-term care. Long-term care insurance can be purchased at any age, although individual and group long-term disability insurance is typically only available until the age of 65, or the standard retirement age.
What is the biggest drawback of long-term care insurance?
Long-term care insurance has the same major drawback as any other insurance: you may pay premiums for years and never use the coverage.