Long-Term Care Insurance

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Long-term care costs can be overwhelming, and must be planned for. But in fact, there are many new alternative ways to pay for long-term coverage that we can help you explore. Did you know…

Research shows that 70% of Americans who reach age 65 will have a need for some long-term care assistance in their life
Medicare does not cover long-term care
For a shared room in a nursing facility, the average cost is almost $8,000 per month
The average cost of a long-term care event, which may be needed by approximately 15% of people, will be about $250,000

Planning ahead for long-term care costs—a likely event for most people—is a part of Holistic Financial Planning that you can’t ignore. Have you thought about how you or your family might pay for this likely scenario if or when it happens? With continued advances in medical sciences, people today are living longer, and along with longevity comes the greater likelihood of experiencing disability or a long-term healthcare event. Even when some might say, “But, I’m staying healthy,” aging is inevitable. There are new options we can explore together.

What Is Long-Term Care and What Does It Cover?

Long-term care (LTC) coverage pertains to the services people may need assistance with as they age or become ill. These tasks are referred to as Activities of Daily Living (ADLs) and include the basic tasks one needs to do such as bathing, dressing, toileting, maintaining continence, meal preparation and feeding. In addition to paying for the services to provide assistance with daily living, long-term care insurance also covers:

Nursing home care
Assisted living facilities
Adult day care services
In-home care
Care coordination
Hospice

It’s not a particularly pleasant aspect of aging and planning for that matter. For some of you, perhaps this may not even be on your radar yet. But for others, you’ve already experienced this firsthand if you’ve seen or helped your parents or elderly loved ones go through it. The fact is that most of us are likely going to need long-term care services before we die, so we should plan for it.

The Biggest Problem

Most Americans don’t even have enough money saved to cover their retirement without running out of assets at some point during retirement. And that’s before a future healthcare event that could require long-term care. By not planning in advance, you could be risking assets that you may have worked a lifetime for in hopes of leaving to your loved ones if you enter a period of prolonged physical illness, disability or severe cognitive impairment that keeps you from living independently.

While most seniors have Medicare as their primary source for assisting with health care costs, Medicare does not pay for long-term stays in a nursing facility. Being that long-term care is an event that’s likely to occur, one might think these services would be covered. But most health and disability insurances won’t cover long-term care. So, what are your options?

1) Medicaid

The most common source of long-term care financial assistance—Medicaid—can have some complicated financial qualification rules that can prohibit someone from even qualifying for the program. It requires a drastic spend-down of all your assets, leaving your family with virtually nothing and potentially bankrupting your spouse.

2) Traditional Long-Term Care Insurance

Private (traditional) long-term care insurance can be very costly. It is becoming much less popular as premiums tend to become unaffordable at the age where you may be more likely to need it. And if you are one of the few lucky ones who never needs long-term care, or you can’t afford the premiums and ultimately cancel the policy, you would have paid in for all those years for nothing.

New Long-Term Care Insurance Alternatives

We are proud to offer alternatives to traditional long-term care insurance, which we can explore together. This is not meant to provide all the details, rather it is just to provide you with the awareness of other options available to you. While these options are not (yet) widely-known, they have been around for a while and can even be more favorable due to their ability to provide additional benefits beyond just long-term care coverage. These added features include a death benefit if not used for long-term care, or even providing liquidity should your plans or intentions change.

What makes these options noteworthy is that instead of solely relying on ongoing cashflow to pay for premiums, which can be challenging for seniors living on a fixed income, these can instead be funded by repositioning assets you might already have. Assets such as old, permanent life insurance policies (whole life, universal life), non-qualified assets like CDs not earmarked for liquidity, or annuities that are no longer needed for retirement income.

1) Asset-Based Long-Term Care

This option allows assets such as cash or money in CDs as well as other non-qualified funds to be ‘cost-shared’ with insurance companies. This cost-sharing allows for funds to be leveraged for multiples of the amount deposited. Usually, the younger and healthier the person, the more leverage. For instance, a female in her early 60s could leverage up to four times in LTC benefits. Additionally, this type of policy can also provide a death benefit and in some cases, even needed liquidity by means of a return-of-premium feature. So, by simply re-positioning an asset out of one pocket into another, the same amount that would otherwise have been used for LTC could now get up to four times the amount, all while having full control of the asset.

2) Hybrid Life Insurance

Hybrid life allows someone to use the death benefit of a life insurance policy in advance as a form of living benefit for the purpose of paying for long-term care needs. Usually, a percentage of the death benefit is guaranteed to be made available on a monthly basis. For instance, if one were to purchase a $500,000 policy with a 2% LTC Benefit Rider, this would mean that on a monthly basis, the policy owner can have access to $10,000 for LTC out of the policy’s death benefit. While this reduces the death benefit in the future, this provides the owner with the needed coverage now without having to use other assets that might be needed to live on.

3) Hybrid Annuity-Based LTC

This option allows someone to use both non-qualified and qualified annuity funds to fund long-term care expenses. This is technically a two-step process wherein the funds first transfer into an annuity (alleviating tax implications in a like-kind transfer), then systematically fund the premiums of a life insurance-based LTC policy. An added benefit when using non-qualified annuities as the source of funding is that gains can be withdrawn tax-free once converted into coverage for LTC and used for that purpose. Some solutions even allow for ‘qualified’ funds such as IRAs to be used for funding and even stretch the benefit over two lives by providing joint coverage over the lifetimes of both spouses.

Starting the Conversation

For many people, even starting the conversation around long-term care can be overwhelming. But it doesn’t have to be. Even when there are a lot of unknowns, with proper planning, guidance and access to the right resources and solutions, this part of your holistic financial plan doesn’t have to be emotional burdensome. And remember, by planning ahead, the people you are helping the most are your loved ones. Don’t become a burden on them, have a plan in place. It’s completely free to explore your options.

I Am Ready

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