The Options…Your Choice
Have you ever needed help feeding yourself?
Have you ever needed a friend or relative to help you bathe?
Have you ever had to ask for help paying your living expenses?
Have you heard of or know someone that has?
Option 1: Stand-Alone Long-Term Care Insurance
There’s no way to know if or how long Long-Term Care (LTC) may be needed individually. Statistic's do indicate 7 in 10 people (69%) turning age 65 today will need, at some point, some type of long-term-care (LTC) services - either at home, or in a facility.
Protecting oneself and family from this devastating expense with LTC Insurance remains a wise consideration. The stand-alone LTC plan pays significant dollar amounts to help pay the heavy monthly cost of long-term care LTC services.
Depending on the insuring language of the policy selected, the stand-alone type LTC Plan reimburses you for expenses that have already been paid. The cost range of a LTC Plan for a married couple, both 55 years of age, ranges between $3000 and $6,300. Premium costs can vary widely depending on the carrier, with older individuals paying considerably more to purchase their insurance. Individuals already suffering from a chronic condition or in need of long-term care are unlikely to qualify for an LTC policy.
LTC insurance will help cover the costs of daily assistance up to a defined daily amount and a defined period of time, usually around three years. Policies that offer longer or indefinite benefit periods will cost more. For this reason, the decision to purchase long-term care insurance can feel like a serious gamble. You may purchase a policy and end up never needing your coverage. On the other hand, LTC insurance may be a lifesaver if you or a loved one ends up needing several years of care. Finally, the policyholder could suffer a condition that requires decades of care, in which case an average policy would only cover a small fraction of the care costs.
Option 2: Life Insurance with a Long-Term Care Rider
One appealing option for investors who do not want to purchase a separate long-term care policy, is an LTC Rider that is attached to a permanent life insurance policy. Life insurance policies with long-term care benefits are increasingly popular partially because the cost of a properly designed plan does not change with age and the costs of the plan can be waived during claim periods. This option pays out monthly lump sums versus reimbursement of expenses paid, greatly simplifying administration.
These riders allow the policyholder to earmark a portion of their Life Insurance funds specifically for LTC or use the entire amount of the policy should the need require higher than expected outlays for care. Any unused remaining amount are paid to your named beneficiary as Life Insurance proceeds and are completely free of taxation.
The claims are initially activated by your Attending Physician stating that 2 or more of activities of daily living have been lost due to illness or accident. The plan distributions made are not coordinated or dependent on other insurances you may have.
The benefit can be designed to distribute up to 2% of the Life Insurance amount to a maximum of $20,000 per month, of which currently $11,400 per month is Income Tax Free. The cost of providing this benefit can be remarkably less than other forms of funding. The portion of the Policy cost attributable to the LTC Rider is eligible for a Tax deduction where the individual’s Medical Expense Deductions exceed 7.5% of their adjusted gross income.
Bundling your life insurance with a Long-Term Care Rider brings down the acquisition costs of having separate two policies. The Life Insurance Policy Cash Reserves can be designed to earn equivalent S&P 500 rates of return, currently in the 8% range with a No Loss Provision’s should the market rate fall below zero. If you already have this type of plan, it may be possible to add a similar L.T.C. rider for very little annual outlay.
Option 3: Alternative investing options
When options to transfer the risks are neither desirable nor available, accumulating funds for long term care costs require diligent investment planning. Whether you’re looking to prepare for your own needs, your parents’ needs, or both, a proactive investing strategy can provide the necessary funds for long term care down the road. A qualified Investment Counselor can help you build a portfolio with specific investments ear marked for long term care expenses so in time, you can accumulate funding to cover any LTC costs that may arise, without jeopardizing other retirement investments.
Conclusion
Despite the complexity, LTC planning is an indispensable component of financial risk planning. Medical Insurance pays for Hospital and Medical treatment necessary to recover from an illness or accident. This costly gap in coverage is the responsibility of the individual. Should individual conditions be severe enough to be eligible for Government benefit plans, amount’s paid by Medicare or Medicaid are recaptured from the estate at death.
Without proper preparation, unexpected long-term care costs can jeopardize your financial stability during retirement or put tremendous pressure on your family.
Proactive LTC planning is a tremendous gift that can be provided for your family. Whether you opt for stand-alone long-term care insurance, a life insurance rider, or an earmarked investment approach, long-term care planning ensures peace of mind and quality care in the event of a serious health condition.
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