Long-Term Care Planning

On average, 69% of people age 65 or older will need some form of long-term care

Most do not have Long-Term Care (LTC) Insurance

Unfortunately, most people do not have any form of LTC insurance.

We get it, paying for LTC insurance isn't fun. However there are some new tools consumers can use with
lower premiums and even ones where you can get a full return of premium if you do not end up needing the coverage.

69% of people age 65 or older will need some form of Long-Term Care

Long-Term Care Stats

Look at the following statistics. If they don’t scare you into taking a long look at obtaining some kind of long-term care insurance (LTCI), nothing will.

  • On average, 69% of people age 65 or older will need some form of long-term care (according to www.longtermcare.gov).
  • The average daily cost of a private nursing home room in 2018 was $275 a day or $100,375 annually (private room).*
  • The average daily cost of an assisted living care facility in 2018 was $132 a day or $48,180 annually (private room).*
  • However, in some states, the cost for nursing home care is much higher: Alaska ($907 per day), New York ($401 per day), CT ($452 per day), California ($323 per day), and Pennsylvania ($333 per day).*
  • Americans who are 65 years old and older and have incomes greater than $20,000, only 16% have LTC insurance.
  • “Failure to prepare for the cost of a nursing facility stay or other long-term care is the primary cause of impoverishment among the elderly.” (The American Health Care Association, 1997)

Do you have LTCI? Based on the statistics, we know for most the answer is NO.

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.

LTCI options

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 support@aswealthmanagement.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

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