Should you have LTCI? Based on the statistics, we know the answer is YES! If the average cost of a nursing home stay is over $100,000 a year, how many years do you have to stay in that home before spending a good percentage, if not all, of your wealth?
Why don’t people purchase LTCI? There are really two reasons people do not buy LTCI. 1) Cost. It can be expensive. 2) Need. Many people have the “it won’t happen to me” attitude when it comes to the need for LTC expenses.
What does LTCI cover? It depends on the policy purchased. Some cover only nursing home care while others cover in-home care as well as a number of other expenses. The coverage will have a limit (usually a daily or monthly limit).
What triggers LTCI coverage to kick in? Typically, it’s when you can’t perform “2 of 6 ADLs.” ADL stands for activities of daily living: Bathing, Dressing, Toileting, Transferring, Continence, and Eating without help.
There are several different ways to obtain LTCI coverage. Depending on your situation, one may be better for you than another.
Traditional LTCI—this is the best but also the most expensive type of LTCI. You pay an annual premium of $2,500-$10,000+ a year (depending on your age); and if you incur LTC expenses, the policy will pay up to its daily limit. Traditional LTCI is like term life insurance. If you don’t use it, you do NOT get the premiums back. The problem with traditional LTCI is that most companies have left the market and the ones who are left are raising premiums on existing policyholders (sometime more than a 300% increase). In short, for most this is not a viable option.
Asset-Based Long-Term Care Policies—most people are not aware of the fact that they can purchase a life insurance policy that has an LTC benefit. How can a life policy function as an LTC policy? If you can’t perform 2 of your 6 ADLs (just like a traditional LTCI policy), the company will pay you a portion of the death benefit early as a tax-free monthly payment.
It’s the life insurance that “pays you while living.” These products can come with a return of premium rider (you get your money back if you don’t use the benefit) and a tax-free death benefit if you happen to die before using the LTC benefit. One company will even pay you a rate of return on your premium that should be 1-2% higher than CD/money market returns.
Additionally, these policies have more relaxed underwriting guidelines that make them easier to qualify for than traditional LTCI which has stringent underwriting.
In short, this type of policy is the most viable in today’s marketplace and it’s a hidden gem that many advisors are not aware of.
We hope that after reading this material you are sufficiently motivated to learn more about LTCI. Our firm specializes in helping clients find the right LTCI benefit at the lowest possible cost. If you would like help, please e-mail email@example.com or if you prefer to give us a call, please feel free to do so by calling 206-803-6216.
*Genworth Cost of Care Survey 2018