Long term care insurance

Long term care statistics

Here are some frightening statistics. The chances of someone 65 or older becoming disabled in at least two activities of daily living or of being cognitively impaired is 68% (1). A stay in a nursing home costs anywhere from $70,000 a year on up. And in-home care will cost around $50,000 a year in 2017. And long term care costs are expected to increase around 4-5% a year. So, if you live past 65 you have a close to 70% chance that you will need long term care and it will cost you a fortune each year. Sorry to ruin your day.

The Problem

In light of these numbers you have to ask the hard question,

How can I afford long term care?

The Solution

There are several option that you can consider.

1. Self Fund
2. Have Family Pay
3. Medicare/Social Security
4. Insurance

Self Fund

If you choose to pay for your own long term care costs you will need to have a decent sized nest egg set aside. And don’t forget to earmark some of that for your spouse. Ladies, you live longer, so expect to be the one needing the long term care more.
You see, the problem with self funding is you really have no idea what the future holds. Maybe you are one of the lucky 32% who will never need long term care. But if you do, do you have the funds set aside to cover the cost of long term care services?
And consider your loved ones. If you spent your life creating wealth and you have always believed that one day you would pass on that wealth to your children, do you really want to spend it all in your final years, leaving little to nothing behind?

Have Family Pay

You can always put the burden onto your loved ones. If you suffer a debilitating sickness, injury, or cognitive impairment, your family or friends may be able to chip in and help you out. However, can you count on it? Do they even have the money to pay for long term care services that may run over $100,000 a year? And what would that do to your relationships?

Medicare/Social Security

You might think medicare or social security will pay for your long term care costs. The problem is, medicare might cover you for a short window, but it is not a long term care solution. Medicare does not pay for skilled nursing home costs after 100 days.
And social security? Good luck qualifying for social security, if there is even enough to go around by the time you need it. And social security benefits are not much, certainly not enough to cover the costs associated with long term care.

Insurance

The value of long term care insurance cannot be understated. With it, you get leverage. You pay a reasonable premium and if you need long term care the insurance company will either reimburse you or indemnify you to help cover long term care costs.

Different Types of Long Term Care Insurance Policies

The LTC insurance marketplace has been consolidating in recent years. At one time there were many companies offering LTC insurance. However, there are now just a handful of the best long term care insurance companies left.

Stand Alone

The traditional long term care insurance policy is a stand alone policy that only covers long term care. There is no death benefit. However, these types of policies are the most flexible, allowing you to tailor your policy to fit your specific need and budget.

Hybrid

Another option is long term care life insurance that offers both a life insurance death benefit and long term care benefit. Hybrid policies are great for someone who is concerned about the “use it or lose it” of stand alone LTC policies. With hybrid LTC policies, you either (1) die and your beneficiary receives a lump sum death benefit; (2) suffer a chronic condition and you receive LTC benefits; or (3) receive return of premium benefits.
And it is not simply either/or.
You may receive some LTC benefits but have more coverage left when you die. In that case, your beneficiary will receive the remaining death benefit.

Chronic Illness

Another low cost option is to get indexed universal life with chronic care rider. The chronic care rider will pay out if you are diagnosed with a permanent chronic illness or cognitive disorder. The chronic illness benefit is not considered long term care insurance. Rather, it is considered an accelerated death benefit, that comes out of your life insurance death benefit.

More on Long Term Care Insurance Policies

Stand alone LTC insurance policies are not going to provide the benefits of life insurance. However, they are often less expensive than LTC+LIFE hybrid policies.
Hybrid long term care life insurance policies are typically either dividend paying whole life insurance or indexed universal life. There are different options available based on the different companies out there.
You can find single pay life insurance, 10 pay or 20 limited pay life insurance, and policies that have you pay for life.

Next Steps

If you are interested in long term care insurance quotes or would like to talk over the many options available to you, please stop by Insurance and Estates today.






(1) AARP. Beyond 50.2003: A Report to the Nation on Independent Living and Disability, 2003, (11 Jan 2005).