Chronic illness requiring round-the-clock care is the greatest threat to assets people wish to leave their loved ones.
“The number of adults over 60 requiring long-term care will more than triple in the Americas over the next three decades, from around 8 million people [in 2019] to between 27 million and 30 million by 2050,” according to the Pan American Health Organization, an international agency specializing in health for the Americas.
There are two major factors driving this trend:
Many of these elderly people need full-time, hands-on care, often in an outside facility, which is expensive.
Long-term care (LTC) insurance is a viable and game-changing option for many older adults. It may not be the best solution for extreme ends of the income curve: people capable of funding their own care, or those who qualify for Medicaid.
But for millions of Americans who fall somewhere in the middle, it makes sense to look into these policies.
About 70% of Americans reaching age 65 will need long-term care services, but only 11% have a policy, according to the Department of Health and Human Services.
“It’s the same old story over and over again,” notes financial planner Carolyn Howard, the founder of Sea Cure Advisors and an expert in the field. “Nobody wants to acknowledge the unpleasant fact that they could go through all their savings and other assets just because they need long-term care.”
“Most of us just don’t even want to think about getting old and infirm and needing 24/7 care, particularly in a nursing home,” Howard said. “And if we do think about it, we put off making a decision or balk at spending the money for a long-term care policy.”
“But, ultimately, it’s about whether or not people want to assume all the risk or share it,” Howard emphasized. “So for those that are really squeamish about putting a lot of money into long-term care, even though technically they can afford it, I always remind them that they don’t have any trouble insuring their car or their home, so why don’t they want to insure themselves against the risk of becoming disabled in some way, which is pretty high.”
“I remind them that by doing nothing, they are rolling the dice,” Howard said. “And, interestingly, some of those people who roll the dice on this, don’t roll it in any other regard.”
Part of the problem, Howard and others stressed, is that many people mistakenly assume that traditional health insurance, the Affordable Care Act and/or Medicare, the federal healthcare program for older Americans, will cover long-term care. Unfortunately, that is far from the case.
First, let’s clarify exactly what long-term care is. LTC plans encompass services for those who are unable to care for themselves for reasons including, but not limited to:
LTC includes medical services from doctors, nurses, therapists, or other professionals. Other services include help with daily tasks: food preparation, eating, bathing, dressing and going to the bathroom.
LTC can be invaluable. It can pay for a nurse or an aide who stops by the house for a few hours a day or a few days a week. It can help with the cost of a senior day-care facility, an assisted-care setup or care at a nursing home. These policies usually give you payouts if someone suffers from cognitive impairment—such as dementia or Alzheimer’s disease.
Medicare generally doesn’t pay for such services. It may cover 100 days if you’ve recently stayed in the hospital at least three days. “So if you don’t have long-term care insurance, you’ll need to pay for such costs out of pocket, unless you can qualify for Medicaid,” Howard said.
First, consider your own tolerance for risk. And remember that if you must enter a nursing home at some point, the total cost of all your premium payments combined will almost certainly be less than the cost of a single year in the facility—no matter how many years you’ve been paying premiums.
“When people talk about the pros and cons of long-term care insurance, one big con is that it is expensive,” said Marion Asnes, the former editor-in-chief of Financial Planning magazine and the current president of Idea Refinery LLC, a consultancy for independent financial advisors. “And if you are lucky, stay healthy and don’t need the coverage, you will be paying for something that you don’t end up using. So that’s a negative, as well. But, at the end of the day, you have to remember that it could be a question of ‘better safe than sorry.’”
When shopping for insurance, start working closely with the LTC specialist you have chosen:
“At the end of the day,” Asnes said, “You need to look at this as a critical part of your estate planning. Because in many cases, the money is depleted taking care of one spouse, and then there is very little left for the other. So LTC can be vital in helping maintain the estate for the surviving spouse and, ideally, for the children. There’s no doubt that when chosen carefully, long-term-care insurance can make the difference between living out your life in the most comfortable way possible or becoming, in the worst-case scenario, a tough responsibility for your family, or a ward of the state.”
To learn more about LTC, visit LongtermCare.gov.
©All Rights Reserved. May, 2021. DailyDACTM, LLC d/b/a/ Financial PoiseTM
Gay Jervey is a senior contributing writer for Accredited Investor Markets. She has written for such publications as The New York Times, Money, Inc., Business Week, Fortune Small Business, Reader’s Digest, Good Housekeeping, Working Mother, More, CFO, The American Lawyer, Financial Planning Magazine and The M & A Journal. Ms. Jervey started her career as…
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