Q. A human resources director asked me to address the issue of the "Sandwich Generation" Employee. We reviewed your articles in the December 2004 issues of Benefits Selling and last month's issue that discussed reverse mortgages. We are interested in learning more about using RMs to help finance LTCI premiums. - CFR, Atlanta
A. In order to better understand RMs and how they might be helpful in selling LTCI at the worksite, we interviewed Dr. Barbara Stucki, PhD., project director, at the National Council on Aging. Part I of this article appeared in the December issue.
Q. Are there any other ways that employees might consider using RMs to help fund LTCI premiums?
A. Dr. Stucki: Yes, there are other ways that older homeowners can use a RM to reduce the cost of LTCI coverage. One approach would be to select a LTCI policy with a lengthy waiting period (such as one year) and use the reverse mortgage loan to cover expenses until the insurance starts paying benefits. This could make private insurance more affordable because elders could buy less long-term care coverage. Alternatively, parents could decide to purchase a limited amount of long term care coverage (such as a two-year policy) and use a reverse mortgage to pay for any additional care.
These approaches offer several benefits. When the purchase of long term care insurance is not directly linked to the use of reverse mortgages, homeowners might be more inclined to buy a policy before age 62, when premiums are considerably less expensive. Any future premium increases also might be more manageable for elders who opt for less costly policies. Not having to wait until the homeowner (and in the case of married couples, both spouses) is at least age 62 offers other benefits. As people grow older, they are at greater risk for being uninsurable due to a pre-existing chronic health condition.
Even if using a reverse mortgage is not the total solution, employers do their employees a service by making a LTCI program available at work. The employee, by just opening up a discussion about funding LTCi and referring or deferring it to an agent may avoid conflict and lack of communication with family members.
The National Council on the Aging offers two new booklets to help consumers learn about using home equity to meet immediate long term care needs, and to plan for the future. These free booklets can be found on the NCOA Web site at www.ncoa.org, in the "Use Your Home to Stay at Home" section.
