According to the U.S. Department of Health and Human Services, there is a 70 percent chance that a 65-year-old today will require long-term care at some point in their lifetime.1 Long-term care is extended support and assistance for basic living activities such as mobility, cleaning and bathing.
As you might imagine, long-term care can be costly. As the name implies, it’s a need that’s usually not short in duration. Many people need long-term care for months or even years. In fact, on average, men need care for 2.2 years and women need it for 3.7 years. Twenty percent of all 65-year-olds today will need care for more than five years.2
Long-term care can cost thousands of dollars per month, depending on the type of care you require. If you don’t have a strategy in place, the cost of care could drain your assets, deplete your estate and possibly put you or your spouse in a difficult financial situation.
One potential strategy is to purchase a long-term care insurance policy. With long-term care insurance, you pay premiums today. In return, the insurer pays some or all of your care costs in the future, depending on the terms of your policy.
While long-term care insurance policies can be effective planning tools, they can also be complex to understand. There are a number of different features that can be adjusted to impact the coverage and the premiums. If you’re not familiar with these options, it may be difficult to analyze the different policies that are available.
Below are some common features to look for as you evaluate potential policies. You also may wish to consult with a financial professional, as they can help you determine which features are most important for you.
The elimination period is a form of deductible that is paid with time rather than money. It’s the time you must wait between when you first need care and when your insurance benefits kick in. It is often either 30, 60 or 90 days.
The longer your elimination period, the lower your premium is likely to be. When choosing an elimination period, consider how long you could self-fund your care, or how long Medicare would provide coverage before you would need insurance benefits.
This is the maximum amount of benefits that the policy will provide. It can be stated in terms of time or dollars. For instance, a policy may provide up to three years of benefits or may pay up to a stated dollar amount, such as $1 million. The higher the maximum benefit, the higher your premiums are likely to be.
Like most other expenses in life, health care costs aren’t fixed. They usually rise over time, and sometimes at a faster rate than general inflation. A policy with inflation protection increases your benefits on an annual basis to keep up with rising long-term care costs. Without this feature, you may find that your policy doesn’t offer much purchasing power when you finally need it.
Originally, most long-term care policies only covered care provided in a facility. However, many policies will now cover in-home aides and even home modifications. This is an important feature because it could actually help you stay in your home for a longer period of time.
Hybrid Life Insurance Benefits
What if you pay premiums on a long-term care policy for years but never need the coverage? That’s a concern many retirees have. Fortunately, there are policies available that address that risk.
They have hybrid life insurance coverage to go along with the long-term care protection. If you pass away and leave unused long-term care coverage, that benefit can be converted into a life insurance benefit for your loved ones.
Think long-term care insurance may be an effective strategy for you? Contact us at Jerry Adams Financial Strategies. We can help you analyze your needs and evaluate the appropriate protection options. Let’s connect soon and start the conversation.
This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice.
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