While many caregivers would probably agree that long-term care insurance is a great idea in theory, most would balk at how expensive these plans can be.
Even if you have the means and foresight to purchase a policy while still in your forties, a benefits plan covering only a few years of future care can cost you upwards of $2,000 a year.
And, these plans are not projected to get any cheaper. According to statistics from the American Association for Long-Term Care Insurance, the price of a new policy has increased, on average, somewhere between 30 and 50 percent over the past five years.
For married couples, an alternative to the traditional long-term care insurance plan exists. The so-called, "shared care" option, has the potential to offer couples the protection of long-term care insurance at a reduced cost.
Murray Gordon, founder of MAGA, an insurance agency that focuses exclusively on long-term care insurance, answers some common questions about shared care plans:
Q: What is a ‘shared care' insurance plan?
A: Shared care is a type of long-term care insurance that allows a married couple to take out separate plans that have an option allowing each spouse to become a "rider" on their partner's plan. If a person needs care and their own policy runs out of benefits, as a designated rider, they would be able to dip into the funds of their significant other's policy.
Just like other long-term care insurance policies, a shared care option can be used to help pay for things like: home care, assisted living and nursing home expenses, respite care, hospice care, and Alzheimer's special care facilities.
Gordon says there are two important stipulations that an insurance company has for people who apply for a shared care option: 1) They have to have the same insurance company, and 2) They have to each take out the exact same benefits. For example, if a husband takes out a four-year, $200 dollar-per-day plan, then his wife must also take out a four-year, $200 dollar plan.
Q: How is shared care different from other long-term care plans?
A: Unlike a traditional long-term care policy, which pays out pooled money over a period of time, a shared care option—as its name implies—enables a couple to share a set of benefits by being designated as riders on each other's plans.
According to Gordon, there are two main types of shared care options. The first, and most common, form allows spouses to take from each other's individual plans as needed. The other type of shared care plan involves the creation of a third, separate pool of money that either spouse can reach into when they need to. Under this type of policy, a person cannot take money from their spouse's plan. They can only take funds from the independent pool.
Gordon says people should be aware that not all insurance companies offer both types.
Q: What are the benefits of having a ‘shared care' rider?
A: The main goal and benefits of these types of plans is to save a married couple money, according to Gordon. Policies with a shared care rider essentially allow a person to double the life-span of their plan for less money.
For example, two people buying two, three-year plans with a shared care rider gives each person the potential to access six years of coverage without each of them having to buy a costlier six-year plan. There is an additional premium tacked on to shared care options that can vary, depending on the couple's age and what insurance company they are using. Gordon says the amount of this premium can fluctuate between 12 and 18 percent. But, even with this extra expense, he says that couples can still save money with a shared care option. The spouses in the example above would still pay less money by going with a three-year, shared care option, as opposed to each of them buying a separate six-year plan for themselves.
Another advantage of a shared care plan is that, when one spouse dies, the other spouse can usually access whatever remaining benefits their partner had left in their plan. So, if a woman's husband passes on with $100,000 remaining in his shared care account, that balance could get transferred to her account, generally with no bump in premium payments for her. Some insurance companies may charge surviving spouses about 25 percent of their deceased partner's premium to gain access to the remaining balance on the account, Gordon says.
Q: Who should get a ‘shared care' plan?
A: Gordon feels that shared care plans are particularly useful for couples who have insurable assets and want a basic plan that can help them pay for a few years of care without depleting their finances. Shared care offers a middle ground for couples who may not be able to afford (or don't want to pay as much for) the pricier option of traditional long-term care insurance plans, but who still want to have coverage for the future.
Q: Can an older couple purchase a ‘shared care' plan? What are the consequences of waiting?
A: The average age of a long-term care policy holder is somewhere between 55 and 57 years, according to Gordon. Even so, couples in their mid-sixties can still purchase a shared care rider. But their premiums will be higher than those for a couple in their forties. For example, Gordon says that for a 45-year-old couple to obtain a benefit of $150 per day ($4,500 a month), the total premium for a shared care option for both of them might be $4,200 annually, while the same plan for a 65-year-old couple of comparable health would be about $6,700 annually, simply due to their age. In addition to a premium payment increase, couples who wait to purchase shared care plans also run the risk of being deemed uninsurable. Insulin-dependent diabetics, people who've had strokes, and people with cognitive and memory problems generally do not qualify for long-term care policies, regardless of how much they are willing to pay. Depending on the insurance company, cancer survivors who have been treatment-free for over a year may, depending on the type of cancer they had, be able to get a plan.
Q: What should I look for in an insurance agent?
A: Gordon cautions would-be long-term care insurance purchasers to do their homework on prospective insurance agents before buying a long-term care policy.
He suggests looking for a few key indicators to determine whether or not an agent can help come up with the best plan for you:
- Are they asking the right questions? A competent insurance agent will inquire about your personal health, financial situation, when you plan to retire, and your family history of disease in order to get a feel for what kind of insurance plan design would be optimal for your situation.
- Do they have expertise in long-term care planning? Seek out an agent who is familiar with the ins and outs of long-term care insurance. Some good information to find out: how long the agent has been selling long-term care insurance, and whether or not they solicit the help of a long-term care specialist in their policy planning.