Long Term Care

If there’s one thing we know, it’s that a significant number of us will eventually need some form of LTC at some point in our lives, be it due to aging or cognitive impairment (Alzheimer’s disease or dementia). Per Morningstar.com (2019 edition; https://www.morningstar.com/articles/957487/must-know-statistics-about-long-term-care-2019-edition), 47% of men aged 65 or older will need long term care in their lifetimes; for women in the same age group, it’s 58%. Adding insult to injury (no pun intended), there’s the cost; $48,612 median annual cost for an assisted living facility; $102,200 median annual cost for a nursing home (private room) and $52,624 median annual cost for a home health aide (44 hours/wk; 52 wks/yr). Finally, the average number of years long term care will be needed. For men, it’s 1.5 years; for women, it’s 2.5 years. While the duration doesn’t seem too long, by doing the math we can see that an ALF stay for these durations can cost approximately $72,918 for men, $121,530 for women. Bear in mind, these are median numbers; some stays will be significantly longer. 

One type of long term care policy is a “stand-alone” policy, in which premiums are paid for a set duration of coverage. These policies are useful in paying for care however, the major negative is if you never need the coverage, you could be out-of-pocket for all the premiums paid. There’s also the possibility of premium increases in some plans. Failure to pay premiums could result in a lapsed policy, in which you could lose all the money you’ve paid in. There are, however, some policies which can be converted to “paid up” status with limited benefits/duration.

A more advantageous way to pay for long term care expenses could be through a life insurance policy or annuity which offers long term care benefits (either single or annual premium). For example, with the life insurance policy, care benefits and the death benefit are typically the same pool of funds. With this strategy, if care benefits are needed, they are drawn from this pool; if funds for care are never needed, the death benefit remains intact to be distributed to the beneficiaries upon death. If death occurs while the funds are being used for care, the balance of funds (if any) is distributed to beneficiaries. Truly not a “use-it-or-lose-it” situation. 

An added benefit with the life policy is the cash value which accrues in the policy. The policy owner can tap into it should he or she ever need to (although doing so will reduce the care benefits/death benefit amount). Additionally, riders can be purchased for extended duration coverage. Finally, since the vehicle used is whole life, the illustration gives a “roadmap” as to what values will be at a given point in the life of the policy (assuming premiums are current); no guesswork!

Let us show you how to pay for such care in the event you or your spouse may need it, while also accumulating an account for emergencies and a benefit for your heirs.