One out of every two people who reach age 65 will likely need some form of long-term care before they pass. If you’re like many Americans, you likely don’t have a plan to cover the cost for this sort of care. You think your children are going to pitch right in and be happy about it. They have their own lives, familes and it’s doubfut they can just drop everything to come take care of you. So please be realistic in your planning.
Your children will offer to pitch in. I have a way for them to help you longer and better and it doesn’t involve them quiting their lives.
Many think their 401k was meant to cover the cost. Wrong!. 401k’s were meant to fund your lifestyle during retirement.
Only 15% of the population has long-term care insurance coverage that will help pay for the cost of care. Often, people don’t recognize the need for this sort of coverage (until it’s too late) because they underestimate the cost of care. And they mistakenly assume that Medicare and health insurance will cover long-term care. Wrong again!
Sometimes the cost of long-term care insurance can be a deterrent to getting coverage. Traditional plans have taken a bad rap because of the many increases in premiums. In the long run, TRANSFERRING THE RISK to an insurance company once you do the math is a no brainer.
The idea of paying hefty premiums for coverage they might not need leaves people with a bad feeling. But there is an alternative to use-it-or-lose-it traditional long-term care insurance. Hybrid products provide long-term care coverage if there is a need, or a death benefit if the policy isn’t used to pay for care.
Before opting for one of these products, do your homework or call Retirement Planning Solutions for a better understanding of what they are and whether they’re right for you. Our experts can walk you thru an overview and give expert advice to help you decide for yourself.
If you’re wondering why you even need to transfer the risk to help pay for long-term care, consider the cost of care. According to insurer Genworth’s 2019 Cost of Care Survey, the median monthly cost of an assisted living facility is $4,051.
I can tell you from personal experience, the cost of care can be around $75,000-$100,000 per year. I know because my wife is currently on claim. I highly encourage you to watch this video.
If you want to receive care in the comfort of your home, the average cost of a home health aide is $4,385/month. The average cost of a private room in a skilled nursing facility is $8,517/month. Genworth estimates that those costs will almost double over the next 20 years.
Let’s say your in your 50s now and will need care in your 70s, you might have to spend $100,000 to $200,000 a year. For those who need a higher level of care, with the average length of care being 3.9 years, if you fall into that category, your care could cost you several hundred thousand dollars.
Medicare—the government health insurance program for adults age 65 and older—has some short term coverage in skilled nursing facilities for rehabilitation or therapy services after a hospital stay. Medicare has very short term benefits for skilled care only and will not pay for long-term care, which is assistance with what are called, “activities of daily living”
This is the type of care that someone who is experiencing physical or mental decline might need. It’s usually provided at home, through community-based services such as adult day care or in a facility.
Medicaid—the joint state and federal health care program—does cover the cost of long-term care at home and in skilled nursing facilities. It currently is the primary payer in the nation for long-term care services. You must have limited income and assets to qualify for Medicaid. In other words, spend down your savings to qualify for a place you really don’t want to be in the first place. Nursing homes are not pleasant places, I don’t care how high up on the food chain they are. Income requirements vary by state, usually, your assets (excluding your home and one car) can’t exceed $2,000 as an individual or $3,000 as a married couple. Don’t think about hiding your assets, it doesn’t work. You’ll get caught and pay a penalty before or if ever qualifying.
Most people don’t know about these downsides. Many plan to rely on Medicare or Medicaid to pay for long-term care, according to a 2018 study by Lincoln Financial Group and Versta Research. This is not the plan you want. My mother was on claim for 6 years. She was able to stay at home, with full time qualified home health aides. The insurance company paid the cost (TAX FREE) and she got her wish to never live in a nursing home.
“Long-term care insurance is meant to pay for assistance when the policyholder can’t perform two of the six activities of daily living or has cognitive impairment,” says Marc Weisman of Retirement Planning Solutions an independent insurance brokerage firm in California, Nevada and Missouri. “It covers the cost of care at home, in adult day care, assisted living facilities and skilled nursing facilities.”
Most long-term care policies have a provision that will pay for modifications to your home to make it easier to remain there to receive care, like grab bars in the shower, portable toilets, walkers, canes, etc.
The amount of coverage a policy provides will depend on the benefit period (length) and daily/monthly benefit amount you choose. The average benefit period policyholders focus in on is three years. A typical plan pays out $4,500 to $5,000 a month in benefits. The maximum benefit is then based on the monthly benefit amount and benefit period.
IE: Audrey, who lives in Missouri has a long-term care policy with a $5,000 monthly benefit and a three-year benefit period would have a maximum benefit of $180,000. Is that enough, likely not but it’s the lions share paid by the insurance company (TAX FREE) vs you paying it after tax from your check book.
Something is better than nothing in my opinion.
But traditional long-term care policies are a use-it-or-lose it proposition. Just like your homeowners or car insurance. You don’t expect a refund of premiums for those coverages so don’t expect one from your long term care policy if you pass without using some or all of the benefit, UNLESS you opt for a HYBRID LONG-TERM CARE SOLUTION
How Hybrid Insurance Options Solve the Use-It-or-Lose-It Problem
There are life insurance policies that include a long-term care benefit. These policies overcome the concern about paying for coverage you may never use. You can be reimbursed for long-term care expenses and/or they will pay a death benefit when the insured person dies and hasn’t used any or all of the long term care benefit. Hybrid policies have become more popular than traditional long-term care insurance.
The 2020 Insurance Barometer study conducted by Life Happens and LIMRA found that the reasons people buy combination life products is to get a better bang for your buck, to remove anxiety over long-term care expenses, and to avoid the expense of two policies.
The amount of long-term care coverage you get will depend on the type of coverage you buy. And your death benefit will be reduced if you use the policy to pay for long-term care.
Most people who buy stand-alone long-term care coverage tend to be in their early 50s. Those who buy hybrid policies tend to be older. Some hybrid life insurance carriers will even issue policies to people up to age 85 and one, only one will allow you to use IRA and/or 401K money.
One reason hybrid insurance policy buyers tend to be older is because these products were originally designed to be purchased with a large lump-sum payment of $50,000 or $100,000. Older adults are more likely to have that sort of cash in savings or an annuity or a life insurance policy with cash values they no longer really need.
Hybrid policies are easier to medically qualify for than a stand-alone long-term care policy if you’re older because the underwriting is less stringent. Insurers tend to be more relaxed about the medical conditions they’ll accept and still issue a policy. Still, premiums will be lower if you’re younger and in good health.
I’m often asked this question, “When is the best time to buy a long term care policy”. The answer is really simple: “One day before you become critically ill”, says Marc Weisman, President of Retirement Planning Solutions.
Since no one knows when that day will be, today is the best time to make application.
Return to the website and request a FREE QUOTE today. Tomorrow may be too late.
