LONG TERM CARE

Jim:

An organization I belong to is making available long term insurance (through an agent) for long term insurance through John Hancock.

Both myself (52 years old) & wife (53 years old) have two children aged 14 & 12.

What do you think? Should we purchase it?

Thanks,
Mark

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Mark,

I have a bias against many insurance products. Additionally, I hold that commissioned salespeople are more about commissions than people and might not be completely objective. Listen to everyone, do your own due diligence before you make a decision.

Here are my opinions and thoughts for your consideration:

Insurance salesmen want you to buy the product they sell. You can buy insurance for almost anything. Accord to the salesperson, HIS product is something you need.  There are specialists in all forms of sales. They point out your need and encourage you to buy. They are trained and practiced in every element of sale inducement. Bet you were not told how much “commission and expense” came out of your premium.

Can you afford to buy every type of insurance? If you can, the choice is insure or self-insure. If you can not, the choice is what you can do without. Many if not most average people would be insurance poor if they bought every product. It comes down to what risk will I take or insure according to my budget.

If you decide to insure against any risk you have to weigh cost against coverage. Best coverage always costs more, other levels leave you exposed.

It is my experience that companies seem to promise almost everything until you a have a claim. Then you might be told, “That’s not covered.” Not something you want to hear after 20 years of monthly payments. Denial comes at you because of inflation, rule changes, a policy notice you didn’t read, and lots of charming ways to say “not covered.” You might have heard this already at the doctor's office or with an auto incident, or when whole life policy holders find out that they do not get their “cash value” in addition to the face amount.

You can see why I have a bias. I don’t like undisclosed commissions. I don’t like sales pitches when I seek information. I am not thrilled with performance when an incident occurs.

About long term care:

How long is long? Two, four, six years? What happens if I live longer than my long term care? Average needs may be quoted at 3 years. What if I am above average? Go to a nursing home and ask the average age. Subtract your long term from that average and see how much exposure you will have. Give my regards to all over 85.

What about inflation? I’ll bet that is built in – are the commissions inflated too?
You might ask some tough questions of the salesperson. Do you have this policy? How many people in your company have it? Don’t let them side track you with “We get it through the company.” What happens when employees quit?

You might do well to weigh priorities not just look at long term coverage.

Do you have enough term life? If you have a mortgage and want to put your kids through college, will $500,000 be enough. What about disability? Do both you and your wife have income? Do you have savings, pensions, 401K, and/or company benefits? Have you talked to an INDEPENDENT attorney or accountant about future concerns? There are some good books available – avoid anything written by an insurance professional.

Just to see the salesman squirm, ask him he recommends WHOLE LIFE INSURANCE. Then ask him what happens to the cash value when you die. Why do you have to BORROW against YOUR cash value? Ask him if they deduct what you BORROW from your death benefit amount. Whose cash value is it? If he says it goes to your beneficiary, ask him to put it in writing. Better yet, tell him to call Everybody’s Uncle – 973-267-WMTR (9687) Saturday 10:30 – noon.

It is improper for me or anyone to make a blanket statement about what you should or should not do. There are exceptions to all generalities. I am not a big fan of high commissioned salespeople as consumer advisors. I have no personal stake in your decision but the salesman does.


Buy with knowledge and understanding. Don’t be sold in ignorance and fear.
Everybody’s Uncle