Long-Term Care Insurance

/in , , , /by

The Role of Long-Term Care Insurance in Your Financial Plan

We purchase insurance to shift the risk of a catastrophic financial loss. While we diligently cover our homes and cars, many families overlook the single greatest financial threat most seniors will face: the cost of long-term care. Investing in a Long-Term Care (LTC) Insurance policy is a powerful strategy to protect your life savings and provide you with choices for your care that might not otherwise be available.

The Critical Coverage Gap Most People Don’t See

A dangerous misconception is that Medicare or standard health insurance will pay for long-term care. They will not. These programs cover acute medical needs, not the ongoing custodial care required for conditions like Alzheimer’s or general frailty. This leaves families to face the staggering costs—often exceeding $9,000 a month for a nursing home—on their own. Without a plan, a long-term care crisis can wipe out a family’s nest egg.

Who Needs LTC Insurance?

With a greater than 75% chance that one member of a married couple will need significant long-term care, this insurance is essential for most middle-class families who cannot afford to self-insure against a loss of $300,000 or more. The challenge is that you must purchase LTC insurance when you are young and healthy. Waiting until your late 50s or 60s often makes the premiums prohibitively expensive, and a pre-existing health condition could make you uninsurable at any price.

Navigating the Complex World of LTC Policies

Unlike auto or home insurance, LTC policies are not standardized. Each contract is different, so it is crucial to compare them carefully. Key features to look for include:

  • A Strong Inflation Rider: To ensure your benefit keeps pace with the rising cost of care.
  • Comprehensive Coverage: The policy should cover all levels of care, including at home, in assisted living, and in a nursing facility.
  • Reasonable Elimination Period: A 90-day waiting period before benefits begin is common.

Modern Policy Options

In addition to traditional policies, there are now asset-based or hybrid policies. These combine a life insurance policy with a long-term care rider. If you need long-term care, the policy pays out a tax-free benefit. If you don’t, your family receives a tax-free death benefit. This “return of premium” feature eliminates the “use it or lose it” concern of older policies.

LTC insurance is a critical component of a plan to protect your financial future. It provides the resources to protect your assets while ensuring you get the care you need. It also works in conjunction with government benefits, and understanding how it fits with Medicaid and the VA Pension is key. Call our office at (919) 256-7000 to schedule a consultation.