Half of us will need help with activities like bathing, dressing or eating sometime in our futures; the rest of us will die before needing such Long Term Care (LTC). With at least a 50% chance of needing LTC, it is important to have a plan for obtaining the care before you are most vulnerable.
Seniors that suffer accidents often require assistance either in their home or in a facility like adult day care or the highest level (most expensive), a skilled nursing home. More often than accidents, medical conditions including cancer, cardiovascular disease, diabetes, and a myriad of other ailments to which we can succumb to needing assistance.
There are four ways that people approach LTC. Two methods are thoughtfully calculated while two arrangements are usually unplanned at best and inconsiderate at the worst. Let’s first address these two reactive strategies. Medicare is the first line of LTC defense for some, but for two reasons it should not be considered true Long Term Care. First, it only covers the first 100 days in a nursing home, and those days must be preceded by at least a three-day hospital admission. Second, Medicare facilities are subject to government payment schedules and I wouldn’t wish anyone be forced into Medicare-only service due to their own poor planning.
The other way the financially unprepared receive Long Term Care is by relying on their family to provide for them. If a family member can provide the care, it’s not a terrible thing … unless the caregiver or their home or their family is not adequately suited to the burden. Then it can permanently tarnish a lifetime of memories.
As mentioned above, there are two primary approaches to funding Long Term Care. The first involves an allocation of assets to pay for the benefits. According to www.lifehappens.org “At a median daily rate of $240, an average nursing home stay of 835 days currently costs over $200,000 …”
So, if you can set aside a couple hundred grand today, and make it grow to outpace LTC inflation, you should be good to go. But Long Term Care costs are climbing about 2 ½ times the rate of inflationi, so the investment needs to take on enough risk to achieve the required growth.
The final approach is to transfer the LTC risk to an insurance company. The problem is that there is only a 50% chance you will use the policy benefits. That’s why we’re recommending our clients take a look at the newer “hybrid” life insurance policies that allow the insured to tap into the death benefit to pay for LTC. Your chances of dying are 100%, so everyone who keeps these policies in force throughout their lives will get something back, either help when they need it for themselves or a tax free death benefit for their beneficiaries.
A permanent life insurance policy can be costly, and because the insurer takes on both mortality (death) and morbidity (LTC) risks the underwriting can be more challenging. Like all life insurance applications, the premiums are lower for people in good health than for folks with either risk already heightened.
Call or email us if you want to find out if a hybrid life/LTC insurance policy can help you transfer your risk of a catastrophic Long Term Care expense.