Long Term Care Insurance: Personal Insurance That's Very Personal

By John Lowry, Advisor

Female nurse provides senior woman with breakfast meal and care

What is Long Term Care Insurance, and how can it protect my hard-earned assets?

We all want protection from events that can rob us from our income and assets. That’s why we buy health, life and disability insurance in case of illness; We buy homeowners, liability and auto insurance in case of other unforeseen events; And we even protect against old age by saving for retirement. The question is how to protect our family if one of us becomes an expensive liability due to an illness or aging? How to keep our hard-earned savings from going straight to a nursing home? The answer may be a long term care insurance policy, but the devil is in the details.

Let’s take a look at a few statistics:

  • 70 percent of adults, age 65 and up, will need long term care services at home, in an assisted living facility or a nursing home
  • The cost of assisted caring is already high, and the annual cost is increasing at an alarming rate. According to WhatCareCosts.com, costs are:
    • $7,574 per month for a semi-private room in a nursing home
    • $4,692 per month for care in an assisted living facility (for a one-bedroom unit)
    • $23 an hour for a health aide
  • According to LongTerm.Gov, more than two-thirds of today’s older adults will need some kind of help with the basic activities of daily living for weeks, months or even years as they age.
  • Family members currently give the majority of adult care; And of those family members, the overwhelming majority is given by wives, daughters and sisters, which can take a heavy emotional and financial toll in even the closest, strongest families.
  • Even adults who aren’t elderly may need a little extra assistance due to an illness, injury or chronic condition.
  • Medicare and Medicaid can help, but they may have strict qualification requirements, including liquidation of some assets.

Long Term Care

Fortunately, 80% of long term care can be given in a personal residence or community setting. Well-designed long term care insurance policies allow plenty of flexibility. They are designed to provide for the kind of care wanted, including at home, in the community or at an assisted living or skilled nursing facility.

So, what are the options?

    • Personal Savings and Retirement Income – This is generally needed for normal, non-care expenses like food and shelter, but depending on income, this form of “self-insurance” can certainly be used for care.
    • Life Insurance Options – Many policies have cash values or some form of accelerated death benefits for those with a terminal disease or are incapable of performing everyday functions like bathing, dressing and toileting.
    • Annuities – These can be designed to have regular monthly payments in return for a single premium or a series of premiums over time. This option allows for maximum flexibility. Current or past health is not a concern; however, age, gender, initial premium, inflation and taxes will all affect the value of monthly payments.
    • A Deferred Long Term Care Annuity – An annuity designed specifically to include long term care may be an option as well, for some.
    • Long Term Care Insurance – These policies are designed specifically for financial assistance for long term care services. They do, however, have a large underwriting component. They appeal to those in good health, married and have the means to pay the premiums for an extended time. Today’s policies offer multiple structures and payment options. Consider getting one while you can.
    • Asset Based Long Term Care – Also known as hybrid, combination or linked benefit products. These are life insurance policies or annuities that come with a built-in long term care benefit that allows access to the death benefit or long term care benefit as needed (typically on a tax-free basis). In addition, any cash value continues to grow and, if not used to cover long term care, remains available to transfer to beneficiaries. Unlike the accelerated death benefit described above, this policy can extend the long term care benefits beyond the death benefit, which can create a lifetime long term care benefit.

When planning for tomorrow’s risks, you may want to employ multiple solutions listed above to get the best long term care solution. Take the time now to speak to your BKS Private Risk Advisor regarding available coverages that can be specifically designed for you and your family. You will be glad you did. 

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