All of us now or at some time in our lives will have to take care of someone- a child who is ill, or a spouse who gets disabled or has a chronic illness- but most of the time it is a parent that is aging. We are all living longer. The heavy responsibility that goes along with taking care of a parent is enormous. 70% of people over age 65 will eventually need long term care either at home or in a nursing home.
As a Financial Planner, I would either help plan for it (self-insure) or purchase long term care insurance for all or part of the risk. Now, with assets depleted, many people of all ages are starting to take a serious look at long term care insurance. Some of the concerns that I fielded from clients were:
What if I never need it? Now I have lost all that money in premiums. What if I can’t buy enough of it? What will happen when the benefits run out? What if the insurance company keeps raising the premium? How will I afford it in the future when I am not working? Will the insurance company still be around to pay the benefits? What if I want more home care coverage than skilled nursing care?
All that has been heard by the insurance companies and they have come out with some innovative features to address your concerns:
- Built-in premium on death feature which means that if the policy owner dies before 75 without making a claim, the surviving beneficiary will receive a percentage of the premiums.
- Tiered solution benefit that sets up parameters at different ages for the type of inflation protection a policy owner can get. Up to age 61, for instance, their benefits could inflate by 5%, from 61 to 76 they could inflate by 3% and after 76 they wouldn’t inflate at all.
- CPI based inflation features
- Shared coverage by couples to reduce premium
- Home care coverage and optional home health care riders
- Additional increase in coverage over time without health exam to a maximum of double the original policy.
The number one reason someone buys long term care insurance is that they saw someone they love have a long term care event. Not having long term care insurance can rob a son or daughter of their career because of the burden of care giving for another. It protects them, and their inheritance as well as you. Many times the siblings will split the cost of long term care insurance for a parent but most of the time the burden of care will fall on only one sibling.
Whether the purchase is for you or your parents, the focus should be on the features of the policy that means the most to you. Figure out what you want the monthly benefit to be and then prepare for inflation. Remember, too, that the average nursing home stay is 2.4 years. Good quality home health care can cost $12-$25 an hour depending on the area of the country you live in.
It is hard to predict which company will still be around to pay out the benefits that you have invested for, so the younger you are, the better the company should be. That means the highest ratings at both AM Best and Weiss.
I am embarrassed to say that I was under age 60 when faced with recovery from a car accident. If I had long term care insurance, my family could have saved over $55,000 in care-giving costs. So I know firsthand the benefits of having this type of insurance.
Some of my valued sources for long term care risk management are:
For independent consumer information on Long Term Care Topics:
Phyllis Shelton of LTC Consultant in Nashville, Tenn.
For independent insurance product advice on Long-Term Care:
John Ryan CFP® of Ryan Insurance Strategy Consultants
firstname.lastname@example.org or call 1-800-796-0909 ext. 102
-Fern Alix LaRocca CFP® EA