Long-Term Care: Most Asked Questions Answered

Have you thought about the consequences living a long life will have on your family?

Although everyone’s situation is unique, I can only imagine there are millions of individuals who are concerned with aging.  Either an aging parent or how they themselves are aging.  And to make matters worse are terrified at the thought of possibly needing care.  Everyone wants to preserve their lives through dignified care in their final years.  I can also only imagine that those same individuals are probably looking for a professional to guide them through unfamiliar territory of planning for their care or the care of an aging parent.  The need for long-term care is one of the biggest financial threats you could potentially face.

Let’s start by defining what Long-Term Care is.  Long-term care involves a variety of services designed to meet a person’s health or personal care needs during a short or long period of time.  These services help people live as independently and safely as possible when they can no longer perform many everyday activities on their own.

Have you thought about what your responsibilities would be as a care giver if a parent wished to receive care at home?

Independent activities of daily living include:  chores, finances and managing prescriptions.  These duties usually are performed by a family member in the form of unpaid labor and referred to as “informal care”.

But what about the daily activities of living – such as: eating, bathing, dressing and toileting?  Most care givers feel those activities are better suited for health care professionals.

Once the difference between informal and formal care are understood it is easy to recognize how Long-Term Care Insurance is really there to help the family through a difficult time.

The need for Long-Term Care must be discussed

Many families are spread out across the nation, which amplifies the need for long-term care plans. Adult children who are geographically distant from their parents, can really feel the weight of this issue.  They have careers and families of their own and sometimes cannot shoulder the burden of taking care of their parent(s) should the necessity arise.  At the same time, it is important to them that their parents are cared for.  This is an important lesson to remember as you plan your own retirement.  No one wants to be a burden on someone else.

Financing Long-Term Care is critical in any retirement plan.

People work a lifetime to accumulate a portfolio which will generate sufficient income in order to maintain their standard of living.  Therefore, their portfolio is reduced to the income it generates.  If the money saved for that standard of living does not have money allocated to pay for care, where will the money come from?  Have you thought about the tax consequences of liquidating assets in order to pay for care?  What if the portfolio needs to be sold in a bear market?

If long term care is not part of a retirement plan, a client is forced to rely on either a government program such as Medicare, Medicaid, or the Veterans Administration, or must ultimately reallocate retirement income and assets.

Long-Term Care Insurance is a professional tool that, when used correctly, can protect a family and their assets from the devastating cost of providing care.  Long-Term Care Insurance is meant to assist families, not replace them AND Long-Term Care Insurance is for long term care, not just nursing home care.

Most people don’t have enough money to pay for all long-term care costs on their own, especially ongoing or expensive services like a nursing home.  Often, they rely on a combination of resources to pay for care.  Resources such as:  personal funds, private health insurance plans, private financing options, such as long-term care insurance, life insurance policies, and reverse mortgages.  Lastly, government health insurance programs, such as Medicare and Medicaid.  However, government assistance would usually not kick in until not only that person’s assets were virtually depleted, but the assets of their spouse as well, if the assistance is even available at all.  Therefore, anyone with assets to protect may want to consider this insurance.

There are many reasons to purchase Long-Term Care insurance.

It is not unlikely you’ll one day need long-term care and if you do, it could bankrupt you.  Statistically, 70 percent of those 65 and older will need long-term care, either at home or in a nursing home.

A life-changing occurrence can occur at any age.  If you are left paralyzed at 30, you could conceivable need life assistance of some sort for the next 60 years.  If you’re covered, you could be set.  If not, it’s too late.

Cost

LTC policies are complicated and expensive and cover a risk that most of us would rather not think about.  These policies are typically defined by how long they pay benefits (in years) and how much they pay each day (maximum daily benefits).  All are different. Make sure you fully understand the payout policy on any coverage you are considering.

If you’re considering ways to reduce costs and are forced to choose between flexible benefits and the length of coverage, trim back length before cutting options like inflation protection and home care.  Exhausting even a three-year policy is pretty uncommon.  That’s because most care begins at home or in an assisted-living facility where you’re likely to be spending less than your maximum daily benefit.

Policies also come with a deductible (called the elimination period) which is typically 90 days.  However, a policy’s deductible may run 30 days, 60 or 120 days. Which means the insurance will not pay for the first 30, 60, 90 or 120 days of your care.  With the average nursing home more than $200 a day – how much of this can you afford to fund yourself?

There is no “one size fits all” solution.  Your cost for insurance protection will be based on your age and health when first applying, as well as how much coverage and what options you choose.  You will never be younger or healthier than you are today.  Planning now gives you the most options and you may be able to qualify for good health discounts.  Discounts that remain even if your health changes.

Many policies include a clause that increases your benefit with inflation, without raising your premium.  Most analysts expect costs to rise 4% each year.  Be sure to ask about it.

Shared Care options are available for couples who wish to link their policies in order to share benefits in the event one person’s benefits become exhausted.  This could be an effective and inexpensive addition.

According to Thinkadvisor.com if you live in Kansas or Missouri consider yourself somewhat lucky.

Kansas ranks 11th least expensive for Long-Term Care Costs in 2014

Average annual cost of $42,005,

Adult day care: $18,200

Licensed home care: $41,184

Assisted Living:  $44,760

Nursing home (private room): $63,875

 

Missouri ranked 4th least expensive for Long-Term Care Costs in 2014

Average annual cost of $38,208

Adult day care: $19,500

Licensed home care: $43,472

Assisted Living:  $30,000

Nursing home (private room): $59,860

For a complete list of cheapest states and most expensive states visit:

Top 15 Cheapest States for Long-Term Care Costs:  2014
Top 15 Most Expensive States for Long-Term Care Costs:  2014

Types of policies:

While the wording may differ per policy, there are three basic categories into which care may fall:  home settings, assisted living and skilled nursing facility.  The ideal policy will cover all three since you never know which you will need.

Sometimes a complex product to understand.

Different policies dictate different reasons for the policy to kick in, such as a cognitive impairment, failure of ability to perform daily activities, and medical impairment.  But not all policies allow for all reasons, and some policies even refuse to consider medical necessity as a trigger.

When should you buy LTC?

Again, there is no “one size fit’s all” answer, but the sweet spot is in your late fifties.  The longer you wait the higher your premium will be.  A lifetime policy that costs a 55-year old couple $4,800 would cost $6,400 for 60-year olds.  Your risk of being turned down as you age also goes up.  In your 50’s you have a 1-in-7 chance of not qualifying.  In your 60’s there’s a 1-in-4 chance says the American Association for Long-Term Care Insurance.

Who should buy LTC?

For many purchasers it is the ability to preserve assets to pass on or to protect a spouse’s lifestyle.  If you have assets of at least $250,000, not including your home to protect, you should consider purchasing Long-term Care Insurance.

Why now?

Because changes in health happen and can make it impossible for you to obtain coverage.

As always with insurance, you hope you never need it.  But what if you do????  And worse yet, what if you had the chance to plan for it – but you didn’t??

 Got a Question

What’s my next step?

Find out what coverage costs

See if you can qualify

Ask what discounts you qualify for

Contact Benchmark Financial Group

 

Sources:

NIH Senior Health

American Association for Long-Term Care Insurance

Think Advisor