Long Term Care Insurance II

Written by Corinne Berenson, LTC Specialist


According to results of Genworth Financial’s “2007 Cost of Care Survey,” the average national cost of care in nursing homes, assisted-living facilities and home-based care has increased 15 percent since 2004. The survey said the average daily rate of private nursing home care is $204. The cost of assisted living can be close to the same, and even a home healthcare provider averages $19 an hour. As the costs grow an average of 5 percent a year, will you be able to shoulder these expenses on your own?

Although the majority of people who require long-term care are over the age of 65, 40 percent are between the ages of 18-64, so don’t think that you’re “too young” to be in care. When considering the purchase of long-term care insurance, understand that you will need to meet medical qualifications, and even a bad diagnoses can make coverage unavailable. Although once you’ve been approved for a policy, it is “guaranteed renewable,” and no changes in your health can affect your coverage. Waiting too long may mean losing your “insurability” due to pre-existing health conditions. Because the premiums are based on your current age, waiting may also mean paying higher premiums. Other factors in determining premiums are health, marital status and the amount of coverage you purchase.


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Baby Boomers and LTC Insurance

From time to time, I will publish articles from other professionals that I feel have important information and value that should be shared with the public.  The most recent news concerning Reverse Mortgages, is that they have exceeded last year’s fundings as more Seniors are beginning to use the money from the loan to pay for their monthly living expenses.

The wave of Baby Boomers coming up through the ranks of aging, will have a very large impact on the Reverse Mortgage industry, because many of them will not be prepared for retirement and will need additional funds to manage monthly expenses.   More on that at a later time. 


Be Prepared for long-term care

Congratulations, baby boomers; up to 3 million of the 76 million of you will celebrate your 100th birthday.

Today’s centenarians have become the poster children for what scientists call the “longevity revolution,” which has added more than 30 years to life expectancy in the past 100 years. How well you live during those extra years will depend on how well you’ve planned for the ordinary cost of living longer and the extraordinary cost if you need long-term care.

We all know the value of buying life insurance — it’s there for a rainy day or to protect the people we love from the financial impact of a premature death. Yet, how well have you protected those same people in the event that you don’t die? How well have you protected your retirement income, and the emotional and logistical burden of caring for you in the event that you are no longer able to care for yourself due to physical limitations or some form of dementia?

Americans are in denial about the oncoming crises in the costs of care. A recent poll indicated that 59 percent of baby boomers are concerned about the growing cost of care, yet 72 percent have made no plans, maybe because we believe that Medicare or Medi-Cal will pay. Think again. Maybe Medi-Cal will, if you’ve become financially impoverished and want to stay at a Medi-Cal-funded nursing home. If you want to maintain your choices and stay out of a nursing home, your only options are to spend your own assets or buy long-term care insurance.


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The New HUD Lending Limit

I’m sitting here, thinking about the new lending limit of $417,000 that HUD has decided to use for Reverse mortgages.   The problem  with it, is that it’s not high enough to help all of the Senior community.   Yes, it’s better than before, but it’s not helping those Seniors who are stuck with payments on large loan balances.

I have found, that most Seniors, if they have a mortgage, the balance is usually pretty small.   But unfortunately there are many of them that took advantage of the lower interest rates the last few years and the “No proof of income” requirement and took out loans that they would have never been able to qualify for, much less be able to make the payment that would be required.

I have a situation right now, where my client is so over encumbered, that she would have to bring in $30,000 to complete a Reverse Mortgage.   Of course she is approved for the loan but due to her youngish age, the amount of funds from the Reverse loan ( It’s calculated on her age), can’t cover all that she currently owes on two mortgages that she has.

If only HUD had decided to use the larger figure of $625,000 that they were considering for the new lending limit, I would be able to help my client.   She’s disabled, on SSI and using the funds from a traditional line of credit to make her two mortgage payments and has no other money.

She’s heading for a foreclosure if I am unable to negotiate with the lender to reduce the payoffs so that we can complete her Reverse loan.  And I’m pretty upset about this and very angry at “those” who put her into this position.

Another example of greed and stupidy of the lending industry.   It’s hurting the Seniors, too.

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Veterans Services & Reverse Loan News

I am a member of a group of professionals that work with Seniors, called Focus on Seniors and we meet every other month to share lunch and hear a guest speaker on a topic that usually concerns aging.   We met yesterday at Cypress Gardens, a Senior community in Ventura, CA and our speaker was George Compton, Col. USA (Ret.).

He’s a decorated Viet Nam Veteran and has many accomplishments, which he would be too embarrassed to mention, but in spite of his humbleness, he’s an amazing man.   At this time, he is the Veterans Service Officer for the County of Ventura and he is totally engaged in reaching out to the Veterans and their families, helping them with problems and questions about their benefits.

He spoke about many of the benefits yesterday and it’s really surprising how many Veterans and their families don’t understand how much is available to them. I”m not sure where the disconnect happens but it’s vital that Veterans know about all of the programs that they qualify for because they are missing out on some wonderful benefits that they deserve and they should be using them.  

George has made it his mission to reach them and make sure that they are taking advantage of their benefits that they are entitled to.  Not only are many of them spending money on medical bills that could be covered under some of the programs offered for Veterans, but there’s even college tuition funds for their children, depending on certain criteria.

The variety of benefits is quite large and far too much for me to go into here, but If you are a Veteran or a family member of a Veteran, I’m going to encourage you to contact your local counties Veterans Service Officer.   You are quite possibly spending unnecessary money for medical services and you may also be able to take advantage of other benefits that could save you money and you need to know about this.

On another note, the figures for the origination of Reverse Loans are up for this fiscal year that ended in Sept.   Per NRMLA, the figures stand at $112,100 HECM’s that have closed and funded.  Most of the growth in the industry has occurred in the last 18 months or so and when you look back into the early years of Reverse loans, the figures were very, very small (43,131 in 2005).

The HECM (Home Equity Conversion Mortgage, offered by FHA) has surpassed the figures for the previous fiscal year and I’m sure that, that’s due to the current economic conditions which is particularly hard on the Senor community.  Gradually, Seniors are over coming their fears about the loan and starting to be a bit more open to it’s use and this is represented in these latest figures as well.

With the higher lending limits set by HUD and more people becoming educated about Reverse loans and their benefits, plus the Boomers coming up through the ranks, it’s just a matter of time when it will be routine to have a Reverse mortgage as part of a retirement plan.

Seniors who have done a Reverse loan in the past, can now take advantage of not only being older (The one time it’s advantageous to be “old”) since they did their loan, but with the higher lending limits and lower interest rates, they are in the position to refinance their original loan and receive more money.

If they refinance, they will still have the same closing costs as they did before, but the MIP (Mortgage Ins. Premium) will be prorated from the original amount.   This means, that they won’t be paying the full amount for the insurance once again.

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Reverse Loans and the Mortgage Meltdown

Because there has been so much turmoil in the secondary market for mortgages, it has resulted in some changes in the variety of Reverse loan programs that used to be available.   The trend seems to be moving away from those that are tied to the Treasury Bill and leaning to the LIBOR index for the Home Equity Conversion Mortgage , otherwise known at the HECM.

And in the last few months we have seen the Reverse Jumbo loans disappear as equity in homes has declined.  Previously these loans were a good option for the Senior who’s property value exceeded the local HUD lending limit and they allowed the applicant to receive more money than they could through the FHA loan.

Now that is no longer the case but the good news is that with the new HUD lending limit at $417,000, loans can still be done and help Seniors who are struggling under the current financial environment.

I recently participated in a Senior event in Ventura and was quite surprised how many people came up to my table (usually they avoid me) and shared with me, that they had a Reverse Mortgage and how happy they were with their decision.

I was quite surprised, because I have found that most Seniors won’t even make eye contact with me, as though I’m so sort of evil person.   It is very difficult and the biggest obstacle to get around, in that so many Seniors continue to be afraid of the loan and remain ignorant of it’s value to them.

The current financial disaster is hurting all of us but unfortunately it is hitting the Senior community the hardest. Too many of them are finding themselves without adequate funds to get through each month and are very frightened as to whether or not they will be able to survive financially and they don’t know what to do about it.

And who is going to help them?   Their children?  Probably not, because they are either losing their jobs and homes and finding out that their on 401K is disappearing and growing smaller each month.   They aren’t in the position to help their parents.

Mom and Dad are on their own.

And then I  “sigh”.   If only more of them were willing to talk to a professional Reverse loan consultant, get past the fear and find out how the loan can give them peace of mind and free them from the anxiety that they are suffering from at this time.

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Reverse Loan Consultant