How financially stable is your insurer? Do you understand the new rules specifically for Washington State residents?
- Rating agencies have information on the financial stability of your long-term care (LTC) provider.
- Never settle for an insurer rated less than “A,” no matter how good the deal.
- Washington State recently passed a law that may help certain residents pay for LTC.
As we discussed in Part 1 of this post, the cost of LTC is significant and filled with financial, but also emotional, considerations. I discussed three viable solutions to consider for you and your family. I’ll now explain how to assess your insurer’s long-term financial stability and new rules specifically for Washington State residents.
Do Your Due Diligence
If you decide to purchase any type of insurance product, make sure that the company holding your policy will still be in business and can pay your claim 10, 20, or even 50 years from now. It’s impossible to have 100 percent certainty about an insurer’s long-term financial stability, but reviewing the insurance company’s financial rating is a good place to start. There are four major agencies that rate insurance companies: Moody’s, AM Best, Fitch Ratings, and Standard & Poor’s. You can review the four agencies websites and look for companies that are A-rated or better. Top insurers will often display their ratings on their websites.
Impact of New Washington State Law
Earlier this year, Washington State passed a law that will help residents pay for LTC costs through a state-sponsored LTC insurance program called “The Long-Term Care Trust Act.” According to Forbes, the premiums will be funded with a payroll tax of 0.58 percent on employees. Washington State will begin collecting the tax in January 2022 and start paying benefits in 2025.
Like any government program, details can change prior to or even after implementation. One aspect that distinguishes our home state’s plan is that Washington State will require recipients to show evidence of needing assistance with at least three of the six Activities of Daily Living before receiving a benefit. Also, the Washington State plan will likely cap the total lifetime benefit at an estimated $36,500.
LTC can be one of the most stressful and unpredictable expenses we face as we age. There is no clear one-size-fits-all solution to address every situation, especially when emotions, family dynamics, and geography come into play. As I remind you again, you don’t want to be a do-it-yourselfer when it comes to LTC. There are plenty of viable solutions if you know the right questions to ask. If you decide to purchase an insurance product to help afford LTC, make sure you and your advisor do the homework and review the financial stability of the insurer you’re considering, not just on the plan options.
As always, we’re happy to help you every step of the way. Contact me if you or someone close to you would like to discuss your situation in more detail.
James Nevers,CFP® is a Senior Advisor at Soundmark Wealth Management, LLC. James works closely with physicians, business owners, directors and executives at Amazon, Microsoft, and Boeing, and other successful individuals to help them define their financial goals and implement an ongoing financial planning process.
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