Who should get Long Term Care Insurance?

In the insurance industry, statistics are the essential tools that build every policy.  Statistics tell a story and help us predict, to some degree, what the future may hold. When it comes to the possibility of needing long-term care at some point in your life, these statistics become tools for you to use as you craft a plan for your potential needs.  Long-term care insurance has evolved to help you meet the financial burdens associated with lengthy stays in assisted living facilities, at-home caregivers, and other age-related costs.  But not everyone will require long-term care in their life which begs the question: Who should get long-term care insurance?  Well, let’s look at the stats. 

As of September 2019:

• The average annual cost of a semi-private room in a nursing home (not a private one) was almost $90,000! 
• The average length of stay in a nursing home is 272 nights (that’s the average!). * (Rand Corporation, 2017) 
• Women are far more likely to need long-term care simply because they outlive their male counterparts.

This last statistic begins to answer the question of who should get long-term care insurance. I was once told by an insurance professional that specialized in long-term care insurance that “if you live long enough, everyone will need some form of long-term care, and we men have the common decency to just die.” Statistically, women outlive men and therefore have a much greater chance of needing care.

So, who should get long-term care insurance? The answer: probably not everyone. 

However, everyone should have a plan. Anyone who has known a family member or a friend who has lived in a long-term care facility can attest to the financial burdens that can drain a family’s bank account. A one-year stay in a “semi-private” nursing home can absolutely decimate someone’s retirement savings.

Won’t Medicare and Medicaid Pay for Long-term Care?

Medicare does not pay for long-term care, despite popular belief. Medicaid, on the other hand, will. Medicaid is a government program that assists those with limited means and income. In order to gain access to Medicaid, you would need to spend almost everything you have first before you would qualify, thus making you essentially destitute. Once you do qualify for Medicaid, you could get nursing care at a Medicaid accepting facility. Although there are very good, clean facilities that accept Medicaid, I can assure you that given the choice, you would not choose to go there.

What about your adult children? Won’t they be able to help? You won’t need that much help anyway, right? In 2019, nearly 66 million Americans or 23% of the U.S. adult population were acting as at-home caregivers for a family member that required long-term care.  This is a very difficult situation for any family.  The financial burden falls onto the family member who must cut hours at work or quit their jobs to become a caregiver for a loved one. 

The question here really is: Do you want to be a burden to your kids and grandkids? I’m guessing not.

Hope for the Best, But Have a Plan for the Worst

Back to the plan. Everyone and I mean EVERYONE, needs a plan. Traditional long-term care insurance, also referred to as standalone long-term care insurance, has steep monthly premiums and may be too expensive for most people’s budgets.  Additionally, insurance companies are having to increase the premiums on people’s policies on a fairly regular basis. Most companies have gotten out of the traditional long-term care insurance business altogether.  

There are other options that can help offset the costs of long-term care that may be more attainable.  These options consist of increasingly popular hybrid products and what are called asset-based long-term care policies.

Traditional Long-term Care Insurance is a ‘Use it or Lose it’ Proposition

Traditional long-term care insurance policies are becoming very difficult to find. Only a few insurance companies are left that offer them. This type of insurance is generally thought of as the most comprehensive. You will know exactly how much you will get when the time comes for needing it. 

The biggest objection here though is, and rightfully so, if you don’t use it, you lose it. This means you pay your premiums every month with the hope that you never need it. And, if your hope comes true, then you lose all the premiums you’ve paid in.

How Annuities and Life Insurance with Long-term Care Riders Offer Protection without Sacrifice

Hybrid insurance products are plentiful, but the general idea is that you can combine a life insurance policy or an annuity with either a chronic illness rider or a long-term care rider. In the event that you are unable to perform 2 of 6 activities of daily living (think of these as the 6 things you do when you get up in the morning):

• Bathing
• Dressing
• Eating
• Transferring
• Toileting
• Continence

then you can access your life insurance or annuity to pay the cost of the long-term care when you need it most. This also takes care of the “use it or lose it” problem people have with traditional long-term care. At the risk of sounding morbid, everyone dies eventually, so one way or another, you or your loved ones will get the benefit of the insurance.

True long-term care riders come at an additional cost to the policy but are often far more affordable than a standalone long-term care policy. There are also chronic illness riders, which come at no additional charge and can be added to many policies to cover the same issues. Chronic illness riders, however, do not pay out with the same defined benefit as the long-term care riders do. You may only get a fraction of the amount depending on factors associated with how sick you are. With that said, these chronic illness riders are a terrific way to gain some coverage if on a budget.

Asset-based, Long-term Care Policies

Finally, there is another type of hybrid product called an Asset Based Long Term Care policy. These policies are a great fit for those people who have a sum of money that they are not going to need. The idea here is to take that money and use it to purchase, either in a lump sum or over a period of a few years, a life insurance or annuity product designed to pay for any long-term care that may occur in the future. 

Depending on a few factors such as age and health, that $150,000 certificate of deposit sitting at the bank can be leveraged up to $232,000 in long-term care coverage! Over a 3 year period, that is $85,000 per year in coverage that would make a serious dent in the above-mentioned statistic of $90,000 per year for a semi-private room! And, if you don’t use it for long-term care, you don’t lose it! The $232,000 would be paid to your kids as a life insurance benefit that is income tax-free! 

There is a Long-term Care Solution for Everyone

We realize that not all people have a large sum of money sitting in a cd at a bank not earning any interest. Asset Based Long Term Care insurance isn’t meant for everyone. The point is, there are products out there that can fit each individual’s situation, and we’re here to help make sure you don’t become a burden to your loved ones. Our chief aim is to provide options for you to safeguard your hard-earned retirement savings. Also… people needing long-term care services are not just the elderly. We are all one bad car accident away from not being able to feed or use the restrooms ourselves. Everyone needs a plan.  Feel free to ask us how we can help you secure your family’s financial future and create a plan to weather any eventuality.