How to Assess LTC Policy

December 1999

Factors include provider, taxes, coverage, rates

Last month, we discussed the importance of planning to deal with the possible need for long term care (LTC). One strategy is to purchase an insurance policy. For public school employees, the most cost-effective policy is a group plan such as the one offered by WEA Insurance. Seventy school districts either have the group LTC plan or will have it in the near future.

What if you are unable to get group coverage? Your other option is an individual LTC policy. However, trying to figure out which individual policy to buy and what options to select can be daunting because there are many companies offering LTC protection, and the benefits and premiums vary considerably. What should you look for when buying an individual LTC policy? Here are some things to consider:

• Financial status of insurance company: Most people won’t need the benefits from their LTC policy for many years, so you’ll want to make sure the company will be around when you need it. Check the company’s financial ratings with agencies like A.M. Best, Moody’s, or Standard & Poor’s.
• Tax-qualified status of policy: If the policy is tax-qualified, your premium may be tax deduct-ible, and any benefits you receive will not be considered taxable.
• Type of care covered by policy: You should look for a policy that provides benefits for care in a variety of settings, such as a nursing home, assisted living facility, adult day care center, or at home.
• Total lifetime benefits: You can usually choose to have either a fixed or an unlimited amount of benefits, with the latter being a more costly option.
• Inflation protection: If you plan to have your policy for more than five years, consider this option. It protects benefits from erosion over time.
• Elimination period or waiting period: This is the number of days you will pay for LTC costs before the policy begins to pay. If you choose a longer elimination period, your premium is lower, but your out-of-pocket costs are higher. An elimination period of 90 days is a reasonable cost/benefit compromise. Also, check to see how the elimination period can be satisfied. It’s best if any day of required care can be used to satisfy the requirement. Some policies require that you receive benefits for a consecutive-day period to satisfy the elimination period.
• Non-forfeiture benefit option: By law, insurers must offer this option, but it dramatically increases the premium and acts as little more than a savings account bearing no interest.
• Premium rate guarantee: Since LTC insurance is relatively new, rate guarantees are important. Good plans offer a rate guarantee of five years.
• Waiver of premium: Once you start receiving benefits, this option allows your policy to stay in effect while waiving your obligation to pay premiums.
• Coordination of care: Some policies offer to help you find care and arrange for the services most appropriate for you – a handy feature.
• Premium rates: Like many insurance products, long term care insurance premiums vary considerably from one policy to another. The best policy is one that balances superior benefits at attractive rates. Comparing identical features is critically important when reviewing premium rates.

The Trust can help

Concerned that members wouldn’t have enough time or information to sort through all the options, the WEAC Member Benefit Trust reviewed individual LTC policies available on the market and selected one to offer members, their spouses, dependents, and parents.

The Trust also holds educational seminars on LTC throughout the state. Members can use the Trust to learn more about LTC, to compare LTC policies, or to buy a policy. Purchasing a policy through the Trust means we can act as your advocate should there be any problems in the future. For more information on the individual LTC policy or to learn more about LTC, call 1-800-232-6632.

A TSA gift for the holidays

By Jim DiUlio
Retirement Consultant
WEA Tax Sheltered Annuity

How about giving yourself a gift this holiday season that has no calories, requires no batteries, and is guaranteed to fit? We’re talking about starting a tax sheltered annuity (TSA) account, or if you have one already, increasing the amount you contribute.

This “gift from Uncle Sam” began in the 1960s when many states had meager pension plans. School employees were allowed to set aside part of their paychecks in a TSA plan on a pretax basis. While school pensions and benefits have improved considerably over the years, the TSA remains a tax-efficient way to save for retirement.

Why consider it a gift? Consider the immediate and long-term benefits of putting money into a TSA. Say you contribute $100 to a TSA. If your federal and state income tax rate is 30%, your out-of-pocket cost for the contribution is only $70. That’s because the government “gives” you the $30 to invest, money that you would otherwise have paid in taxes. You do eventually pay taxes on the $30 when you begin withdrawing the money from your TSA. But, between the time you invest this money and the time you withdraw it, you have a lot of years in which you earn interest on the money. This is a good time of the year to take advantage of this gift because most districts allow TSA changes and new enrollments in January.

Trust to offer 7% rate next year

If you’re wondering where to start, why not begin with an organization that was created specifically for you. The WEA TSA Trust is a not-for-profit organization created to provide TSAs to public school employees.

Next year, the Trust is offering a 7% guaranteed interest rate.

For more information, call 1-800-279-4030, or visit our Web site at www.weatsa.com.

Posted December 1, 1999