Is Long Term Care Insurance Worth It?
Long term care is an expensive but valuable piece to your insurance portfolio. Here we weigh the pros and cons of having one, and attempt a possible bridge between the two.
To date of the writing of this article, there is not yet a way to know your future. If you attempted to purchase insurance coverage for every risk you may encounter, you most likely would be very cash poor. Naturally we must dwindle down the largest and most likely risk to occur and attempt coverage for those. U.S. Health and Human services reports that over 70% of adults who make it past the age of 65 will experience a long term care service and support scenario, and of that group roughly half will find it necessary to pay for some sort of care as a result. So the numbers say it is quite likely that we all will either experience or be affected by someone who requires long term care service. The numbers also say that the national average cost of a private room in a nursing home facility is $7,698 per month. This incredible cost, combined with retirees lack of earned income, has been known to wipe out the financial assets and generational wealth of family’s all over the nation. Long term care insurance is a plan that attempts to shelter income and assets from the exorbitant, but necessary, cost of care.
What are the Pros of Long Term Care Insurance?
Unlike disability, long term care insurance benefits are not based on a percentage of your income but on the actual costs associated with care. You can be assured that if the money is there it will pay for all services. Your total benefit will depend on several factors, but in general there are more riders and attachments of coverages on LTC policies than most other types of insurance. Some of the more valuable riders would be a cost of living adjustment, return of premium and shared care (spousal coverage). LTC premiums are also tax deductible if being made towards a qualified plan and over a certain percentage of your AGI. Lastly, in my planning experience I have noticed larger premium discounts on LTC plans in comparison with other types of insurances, in some cases up to as high as 15%.
What are the Cons of Long Term Care Insurance?
The costs associated with maintaining a LTC plan are typically higher than what the average consumer would like to pay. The pain is usually felt more as the client ages because the carriers all have the ability to adjust premium rates based on age and risk throughout the policy’s duration. All this money goes into the plan, and if there is not a qualifying disability experienced requiring care, will not come back out. At most, with the right rider and at a surcharge, you can receive your premiums paid back and nothing more. These are only features you experience IF you actually are able to be approved for a policy. LTC carriers are notoriously meticulous in their medical underwriting of applicants and applications have been known to be underwritten for several months. Lastly, if your demise happens to be sudden, that is death without drawn out periods of care, then again there will be no return of premiums. This type of policy will be a god-send if in the position of needing care, but it is about worthless for anything short or in-between.
A Hybrid Policy may be the solution
Most find that LTC plans are worth the costs, time, and risk associated with purchasing. Simply because those issues do not outweigh the much heavier costs of needing care such as this and not having the resources to afford it. That does not mean however that you are doomed to just having to grin and bear-it. Carriers now are wising up to solving some of the longstanding headaches of conventional LTC. They are combining them with Indexed Universal Life insurance plans. By doing this, they are solving the lack of death benefit and cash value accrual problems associated with the classic plan. In addition, being attached as a rider to a life policy that does accrue interest bearing cash value, you can greatly lessen and steady the costs of coverage. Bay Life is well experienced in engineering these types of hybrid plans and the classic stand-alone plan as well. If you need more information or guidance on how to cover yourself for the highly likely, fill out a contact request or message at the email below and we will gladly help!