Online Financial Tips

Archive for May, 2011

Long term health care insurance is different from regular health insurance. A comprehensive health insurance covers you for not more than 90 to 120 days. If you want to ensure that you will not be in financial crisis due to your need for long term non-medical care in the future, you should seriously consider buying long term health care insurance when you should.

If the care you need in the future is purely medical in nature, it still falls under your regular health insurance. However, if you need long term care of assisted living, you will need more than just regular health insurance.

There might be a possibility that you are not capable of taking care of yourself due to old age or health complications. This might lead to situations where you need help in performing daily routines such as bathing, dressing up and others.

You may argue that you will be cared by your family if the above mentioned situation happens to you, but how sure are you anyway? Furthermore, if you do not have long term health care insurance, your incapability to do simple life routines will affect you and your family emotionally, physically and financially. Using a nursing home can cost you an arm and a leg which puts you in serious financial problems. To avoid this from happening, long term health care insurance is needed because your regular health insurance does not cover the costs of assisted living.

It is advisable for you to consider purchasing long term health care insurance once you reach 50 years old. However, if you are rich and have no problem paying big sums of money for assisted living expenses whenever there is a need, long term health care insurance is not something necessary for you. Or if you are so poor that you qualify for Medicaid, you do not need the insurance too.

Healthcare costs and long-term care costs are one of the biggest concerns today for many people. Long-term (LT) care insurance can help protect you against the significant financial risk posed by the potential need for long-term care services either in a nursing home, assisted-living facility, or in your own home. These policies can help you preserve your assets for your spouse and/or heirs. They are purchased for asset protection, to minimize the dependence on other family members, and to have some control of where and how you will receive long-term care services.
LT care goes beyond medical and nursing care to include all the assistance you will need if you have a chronic illness or disability that leaves you unable to care for yourself. The US Department of Health indicates that people age 65 face at least a 40% lifetime risk of entering a nursing home sometime during their life, and 10% will stay there five years or longer. The odds of entering a nursing home increase with age, and currently 22% of people age 85 or older are in a nursing home. While older people are more likely to need LT care, your need for it can come at any age. The average cost of a private nursing home room is about $70,000-$75,000 per year. These costs vary significantly based on what part of the country you live in. The typical stay in a nursing home is between 90 days and four years (average is 2-2.5 years). Benefits are typically triggered when you can’t perform two “activities of daily living” such as bathing, feeding yourself, dressing, getting from bed to chair, and going to the bathroom (and the condition is expected to last at least 90 days). Benefits can also be triggered if you develop severe cognitive impairment (like Alzheimer’s).

Aren’t I already covered for this? No.

Generally Medicare and most regular health insurance plans will not cover long-term care costs. Medicare supplemental insurance (Medigap) also typically does not cover LT care costs.

Who should buy LT care insurance? Who shouldn’t bother?

Wealthy people (with assets over $3M) that can afford care on their own typically don’t need to buy LT care insurance (they can basically “self-insure”). For a very wealthy family if they are forced to live in a nursing home for 3 years at $75,000 per year the total cost of $225,000 will not wipe them out. Some wealth people buy LT care insurance anyway for the peace of mind and for emotional reasons. “It allows loved ones to care about you rather than caring for you” says Jesse Slome, executive director of the American Association for LT Care Insurance. Those with little assets (below $300,000) also are not great candidates because they likely can’t afford the coverage anyway, and they have a smaller amount of assets to protect. Medicaid may take over coverage after they have exhausted their assets (depending on the state). People in the middle in terms of wealth are good candidates for LT care insurance. People who have no relatives nearby that could help take care of them often consider LT care insurance. Single people who have relatives nearby and don’t really care about leaving an estate may not need/want LT care insurance. If you have a family history of long-term incapacitating diseases like Alzheimer’s, you should think about this type of insurance (and longer duration of insurance) because those types of diseases often cause people to need LT care for many years.

When should I buy it? At what age?

The typical range people buy this insurance is between ages 45 and 70. The premiums increase as you get older (and are thus more likely to end up in a nursing home). The premiums start to increase especially as you get over the age of 60 and are very expensive at age 70+. If you don’t have a family history of chronic illnesses and you are in good health you can probably wait until you are around 55-60 years old to buy.

What are the variables that determine how much my LT care coverage will cost? What are important things to consider when shopping for a policy?

1. Duration of coverage (this can range from just a couple years coverage up to unlimited or lifetime). Given that the average nursing home stay is typically only a few years, lifetime coverage is likely too much for most people and is very expensive. Usually 2-6 years of coverage is enough.

2. Elimination period. This is similar to the deductible on other insurance policies. Your LT care policy doesn’t start paying out for a certain number of days. This elimination period is typically 30-90 days.

3. What exactly is covered? Skilled care and non-skilled care covered? Does it cover help at home? Assisted living? Adult day care? Does the policy require a hospital stay before this (home care) benefit is available? Are pre-existing conditions excluded from coverage? Is Alzheimer’s covered? Most policies exclude coverage for some mental and nervous disorders, alcoholism, drug abuse, and care after self-inflicted injury.

4. Amount of coverage per day? The higher your daily benefit, the higher your premiums. Typical amounts covered are $100-$200/day of costs. The average cost of a nursing home is around $200/day.

5. Inflation adjusted or not? This is important and makes a big difference over long time periods. It also greatly increases the cost (and value) of the policy. Is the inflation protection “compound” (increases by a set percentage each year) or “simple” (increases by a set dollar amount each year)? Compound inflation protection is better.

6. Is the policy guaranteed to be renewable? Can you continue getting coverage as long as you pay your premiums?

7. How and when (after 90 days?) are premiums waived once you get sick?

8. Do you want a “shared care” joint policy with your spouse? These cost slightly more than a single policy but allow either of you to use the full benefits. These policies are significantly cheaper than two individual policies bought separately.

9. How financially stable is the insurer? Check out the ratings at A.M. Best’s website. Several long-term care insurers have gone out of business. Stick with highly rated companies (rated at least “A”).

10. Your age is a big factor that determines how expensive the policy will be.

Other things to consider?

Make sure your policy clearly explains when you will be eligible for coverage and how your eligibility will be determined. Make certain you know exactly what is and is not covered. Are dementia and/or Alzheimers covered? These LT care policies are often very complex and have so many different options that it is tough to get an apples-to-apples comparison across different companies. Only buy as much LT care insurance as you need. Some insurance companies have been able to raise the premiums on existing policies over time, and there isn’t much you can do about it. It is very difficult/expensive to change insurers or policies once you have had a policy for several years (because you are older and a worse insurance risk). Buyers essentially commit to an insurer and a policy for life. Claims are often a judgment call. Do you really qualify for benefits now? Will your insurance company pay up when you need it? The insurer decides whether or not they will pay for the care.

You may not be using your policy for 10-20 years. What will happen to your LT care insurance company by then? Will it still be financially strong? What will happen to the US healthcare system over the next 10-20 years? It is sure to change significantly. Will there be universal healthcare by then which will include LT care? How much will nursing homes cost in 10-20 years? How much will medical technology change over that time period? There are lots of uncertainties surrounding LT care insurance over such a long time period.

How much does it cost?

This insurance is expensive, especially for people over age 65. It is hare to give numbers for the insurance because the policies have so many variables. A healthy 59 year old person can buy a policy that pays $130/day for 5 years of coverage with a 5% inflation protection rider for around $1,150 a year. The same policy for a 65 year old might pay closer to $2,000 per year. Some more comprehensive policies with inflation protection can cost a 65 year old as much as $4,000 per year. Rates depend on your age, health, and marital status (cheaper if you are married).

Tax Issues?

Most LT care policies sold today are “qualified”, which means for federal tax purposes benefit payments received are generally tax-free. If you are self-employed (sole proprietor, partner, or LLC owner) you can deduct all of the premiums for a qualified LT care policy (subject to age based maximum limits). This deduction is available whether or not you itemize.

Long-term care insurance can provide coverage and protection in the event that you or a loved one should need long term care and assistance with daily living activities. These activities would include help with bathing, eating, dressing, etc. While long term care is usually associated with someone who is elderly, it is important to note that anyone of any age may require long term care in the event they suffer an accident or illness that deprives them of the ability to carry out these tasks independently.

While in the past family members, particularly women in the family, have carried out the duties associated with such care for elderly family members and those who cannot care for themselves, our society has changed in such a way that this arrangement may not be possible, especially with most women now working outside the home. In addition, it is important to understand that the need to care for a family member on a full-time basis can quickly place a tremendous amount of stress on the care-giver and the rest of the family as well.

Long term care insurance pays benefits when it has been determined by a physician that a person can no longer provide their own basic needs. This could be due to age or age related illnesses or it could be due to an accident. Such a policy will typically provide coverage for all levels of care in nursing homes that are licensed by the state. The policy may also provide coverage for home health care as well as an assisted living home.

There may be a waiting period during which time there will not be any benefits paid. Once the waiting period has been satisfied a maximum dollar amount will be paid for each day care is provided. If the per day cost of the facility exceeds the maximum dollar amount provided under the policy, you will need to pay the difference out of pocket.

Depending on the type of coverage policy you select it may also be possible to take advantage of what is known as an inflation adjustment feature. This will increase your per day benefit to allow for higher costs that occur as a direct result of inflation.

The age of the persons covered under the policy and the level of benefits you purchase will determine the amount of your premium. If you opt for the inflation adjustment feature and wish for more services to be covered under the policy, the premium will typically cost more. In addition, if you are older when you take out the policy, you can also expect to pay higher premiums because there is a higher degree of risk that you will need to use it. Once the policy is purchased; however, you can usually rest assured that premiums will remain fairly level as long as the policy remains in effect.

Be aware that some preexisting conditions can be excluded from long term care insurance policies. This type of condition may also be subject to a waiting period; typically for six months or more. Always be sure to ask before taking out the policy.

Have you ever gone for more than a week without a car? How about a month, year or more? If so, you know how inconvenient it is not to have your own set of wheels. When it comes to how we use our car, there are two main use categories: a. the necessities, and, b. the nice-to-haves.

Under the category of necessities, we of course have uses for our car like going to work, buying groceries, going shopping for sundries, and visiting the doctor. In terms of nice-to-haves, we have uses like visiting friends, going on dates, going out on the town for a bit of fun, and just taking a pleasant Sunday drive.

The thing is, if you have poor credit due to having a low FICO score, you may be rightfully concerned that you will not be able to take advantage of a car for any of these reasons anytime soon.

If you are looking for poor credit auto financing, here are 5 key points you need to understand:

1. Auto financing interest rates depend heavily on your credit score:

You will not be surprised to hear that getting a good interest rate on your auto financing is greatly dependent upon your credit score. In fact, there is no more significant factor than your FICO score in getting qualified for a good rate.

What makes the credit score so appealing an indicator of credit-worthiness to lenders is that everything – your entire financial history – can be so easily reduced to a single credit score. This makes things easy on lenders. It also makes it easy on people with good or excellent credit scores. Unfortunately, it leaves people with bad credit scores out of luck.

2. Poor credit scores make it harder to get approved or to get a good rate:

Having a poor credit score makes it nearly impossible to get a low interest rate. In fact, many bad-credit individuals cannot even get approved for an auto loan at all.

Fortunately, there is some good news: there are lenders out there who approve applications all day long for people who have a low FICO score. You just have to know where to look.

3. You have more control than you think over your situation:

Given that 95% of auto lenders and financing companies focus so heavily on your credit score, it stands to reason that the other 5% of lenders are trying to capitalize on what the others are overlooking. Namely: the opportunity to extend auto loans to bad-credit individuals.

These companies actually target people with bad scores because they use additional factors – not just the score – to determine somebody’s credit-worthiness. Factors such as employment status and history, residential status and history, and specific details on the credit report (not just the overall score) are also considered by these firms.

4. Comparison shopping pays off:

You need to start by searching for “bad credit auto financing” and related terms. Make sure to find at least 3 companies to which you can apply for a loan. Remember: it is also better to have multiple when shopping for anything – especially an auto loan.

5. As you shop, be sure to record your findings in apples-to-apples way:

As you contact the various lenders you find during your research to get their quotations, be sure you are recording their company name, contact information, and loan terms (including interest rate offered). That way, you can easily go back later and make an apples-to-apples comparison of your findings.

Follow the suggestions in these 5 key points in order to secure auto financing even if you have bad credit.

Are you prepared for the most expensive part of growing old?

The cost of a private room in a nursing home is fast approaching $200 per night.

That equates to $73,000 per year. Now, imagine your total savings & assets. At $73k per year, how long would you be able to sustain the financial effect of that amount of expenditure.

For those who need long term care on an extended basis, the very threat of bankruptcy becomes very real when faced with spending years in a nursing home. And your immediate family who is depending and relying upon those family assets are at risk as well.

If you and a spouse reach age 65, there is a 75% chance one of you will need long term care. At 50%, your odds are already high.

What is Long Term Care Insurance?

If you are hurt, injured or sick you may qualify for long term care. It does not happen only to “old” people. While you can have any one of those happen at any age, we typically think about long term care relative to seniors.

Long Term Care Insurance is not just nursing home care either. Some people move into assisted living care or receive home care by a licensed nursing practicioner. While both are very expensive, they cost substantially less than a nursing home.

What about Medicaid and Medicare?

Medicare pays about 10% on average of your long term care costs. If you go into your senior years expecting Medicare to provide all you need, you are going to be sorely disappointed.

Medicaid pays 100% once you are broke. How is that for a game plan? Without a long term care insurance policy you will be required to use your own assets and money until it is exhausted. Then, Medicaid kicks in. If you have dreams and goals of leaving money or an inheritance to a loved one, this route will bust those plans wide open and leave you and your surviving family very unhappy.

The Best Game Plan

Buy Long Term Care Insurance.

When should I buy Long Term Care Insurance policy?

You buy it if you are at least 50 years old and while you are in the best health possible, which is likely right now. The future will only bring health issues as we age. And you will save tons of premium if you buy it while slightly younger and in excellent health.

If you have had health issues, you can still apply. It costs zero to find out if you can qualify and what premium the insurance company is willing to offer you.

What about the Government?

The government has its hands full with issues like social security. The baby boomer generation has begun to retire. The number of workers supporting social security recipients is dwindling. At some point they might have to make adjustments to social security. That is an ongoing debate. Also at the time of this writing (early 2008), there is the ongoing military efforts in Iraq and Afghanistan that is requiring billions of dollars. On the home front, we have mortgage company issues they are still sorting out, and an economy that is wobbly. Factor in a massive deficit, and you would be wise to have a long term care insurance policy to protect yourself. America is still strong but we have lots of issues to figure out.

I would advise you to take control of your own long term care future. Buy a policy and be in control of your destiny, as much as you can.

These days, many people resort to getting a home equity loan when they need to finance a major expenditure like house renovation, debt consolidation or college expenses. It is quite easy to apply for this type of loan. Often, people’s application for home equity loans gets a stamp of approval. This is not surprising since lenders generally view this type of loans as low-risk loans. They don’t actually incur losses because they could always foreclose on the home if the debtor or borrower is unable to pay his loans. This is why home equity loans are sometimes viewed as second mortgages. However, if you have existing debts or mortgages, you might want to consider applying for a home equity debt consolidation loan.

What is HEDC?

To understand home equity in relation to debt consolidation, you need to first understand the concept of home consolidation. Basically, when you speak of home consolidation, you generally refer to the process of taking out one big loan in order to repay all other outstanding loans or debts. You end up with one loan and one interest rate.

When you speak of debt consolidation in relation to home equity, you obviously refer to the process of applying for a home equity loan and using the proceeds to pay off outstanding debts. This is not meant for just anyone because not everyone can qualify for it. It has a limited resource.

Who Needs HEDC?

If you are like most Americans, then you are probably struggling to pay off two or more credit card loans. Unfortunately, many people are sharing the same predicament. Many people are juggling two or three credit cards and they can hardly afford meeting monthly payments for one. Many are even forced to declare bankruptcy because they cannot afford to pay their debts especially the interest rates. If you are one of these many people, you may want to consider getting a home equity debt consolidation loan.

Basically, people who have multiple debts are those that are in dire need of home equity debt consolidation. The requirement, however, to qualify for this loan is home ownership. If you are not the owner of your home, you cannot apply for this type of loan. In that case, you may want to consider other sources for debt consolidation.

Can I apply for home equity debt consolidation if I’m a partial owner of a house?

Yes, you can. As long as you are technically a legal owner of a house, you can place this house as collateral to take out a loan for debt consolidation. You will be basically given a loan that is almost equal to the equity of your house. However, there are lenders who are willing to extend a loan that is equal to at least 85% of the house equity and there are those who are only willing to extend 50% of the value of the house’s equity. Before you actually choose your lender, you should carefully consider their terms, rates, charges and fees. This would give you the chance to get a higher amount of loan to fully pay off all your existing debts.