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Finances Long-Term Care Insurance: Is it Right for You?

 

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Ellen will consider all legitimate questions and prioritize those of broadest concern. Please be patient if your question is not answered immediately. Email your questions to: WilmingtonChapter@hadassah.org with Ask Ellen as the subject. If Ellen selects your question, it will appear in her “Flustered By Finances?” column in the bulletin and/or on her webpage of the same name on our website.

 

 

Long-Term Care Insurance: Is it Right for You?]

 

Clients frequently ask me if it makes sense to buy Long-Term Care insurance and, as you might have guessed, there is no one-size-fits-all answer. 

A Long-Term Care (LTC) insurance policy pays for non-medical “custodial” care, such as help with feeding, dressing, bathing, walking, etc.

 

There are numerous statistics available on the percentage of the population likely to need long-term care, and for how long. Insurance companies and their actuaries constantly assess these statistics to establish rates for LTC insurance. Rest assured that insurance agents will attempt to use the same statistics to motivate you to purchase LTC insurance. But how do you know whether you (as an individual, not as a statistic) need LTC insurance?

 

As with most insurance, you are betting that you will need this coverage while the insurance company is betting that you will not. The reality is that it is a crapshoot. We either win or lose in the “die peacefully before we fall apart” lottery. If we lose, individual custodial costs can run as high as $100,000 a year, with a typical custodial care time-frame of three years. Will you need it? It’s a spin oftheroulettewheel.

 

The essential things to consider are:expectation of care, life expectancy and family health history, and your current and/or retirement financial assets.

 

1) If you are definite that a family member or friend will be able and willing to care for you, you may not need LTC insurance… unless your prospective caregiver will expect payment for the care provided. In that case, you may want to consider buying an LTC contract with a relatively modest benefit.

 

2) If you have a family history of chronic illness, you should carefully review the costs and benefits of LTC insurance.

 

3) How much money you have is a huge factor in determining whether it is worth paying LTC premiums. Depending on your age, health and plan choices, LTC insurance can cost $2,500-$5,000 annually. This expense is very high for those who have less than $250,000 in total financial assets. Ultimately, it may be best to let Medicaid kick in and cover custodial costs after your assets are spent down. Those who have more than $2,000,000 in total financial assets may be able to comfortably self-fund their custodial care costs and may be best served by not incurring a LTC premium expense. BUT if you are in this income category and your goal is to preserve your assets for your heirs, you should consider LTC insurance. If your financial assets fall between about $250,000 and $2,000,000, you are in the sweet spot for potentially needing LTC insurance to PROTECT your financial assets.

 

Be Aware: Not only are LTC costs very expensive relative to their benefits, but, as far as my research has shown, insurance companies are not willing to guarantee that the monthly premium will remain unchanged. They can increase their premium at any time!

 

If you decide that an LTC policy makes sense for you, here are a few tips:

  1. Consider buying LTC before age 60. After age 60, premiums increase significantly.
  2. If available, buy an LTC group policy through your employer. It will cost way less.
  3. Consider choosing a 90-day waiting period before the benefits begin, rather than a 30-day waiting period. This option can reduce your premiums by up to 30 percent.
  4. If you’re married or in a long-term committed relationship and both of you can benefit from long-term care insurance, look into buying a joint policy.Joint policies will pool the total amount of coverage between the two of you. If one person dies without having used up all his/her policy benefits, the survivor gets those unused benefits added to the remaining policy.
  5. Rather than buying a policy that provides a daily benefit equal to the cost of home care or nursing home facilities in your area today, consider purchasing a lesser dollar amount and self-insuring the balance.

To add to the confusion, the industry has developed different types of products – some of which are hybrids that include life insurance. There are so many issues beyond the scope of this article. Every policy should be reviewed VERY carefully. THEY ARE NOT ALL ALIKE. Look at what the policy covers, when it covers it and for how long, which facilities you can use it in, and if there are inflation clauses.

 

My final advice - Proceed slowly and with caution. AND BE SKEPTICAL!

If you have questions about the pros/cons and logistics of Long Term Care insurance, direct them to me at

ellen@ascendinvmgt.com  or 610.558.0787.

 

Ellen Le

 

Note: Ellen will consider all legitimate questions and prioritize those of broadest concern. Please be patient if your question is not answered immediately.

 

Email your questions to: WilmingtonChapter@hadassah.org with Ask Ellen as the subject. If Ellen selects your question, it will appear in her “Flustered By Finances?” column in the bulletin and/or on her webpage of the same name on our website.

 



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