Buying Long Term Care Insurance has both emotional and analytical elements. Since our founding, we’ve worked with thousands of clients seeing loved ones, usually parents, in need of Long Term Care. The motivation to plan for an event so far away and inconceivable for anyone of good health stems from two tales from very different perspectives that helps illustrate the pros and cons of planning.
Two families with very different outcomes.
Those Who Planned - The Pros of Thinking Ahead.
Many of our best clients come from families where their parents planned ahead. While LTC insurance was not common knowledge until recent decades, it was adopted by a significant portion of the population that is now needing care, those typically in their late 70s to 90s. The industry pays millions of dollars of claims every day, and satisfied children of policyholders realize that their parents forethought is saving them and providing enormous benefit, financially and emotionally to the family. You see, when a plan is in place, it removes stress from the family to find creative (and often financially destructive) ways to pay for care. A good LTC plan means that psychologically the care is handled and the family is able to focus on loving and spending time with their loved ones - not selling assets or applying for welfare.
Those Who Didn’t Plan - The Cons of Not Planning.
An unfortunate fact is that the single largest payer of LTC services are state welfare assistance programs such as Medicaid. This is far from an entitlement benefit given to seniors, only those with less than $2,000 in assets can qualify. Many well-meaning savers must impoverished themselves paying for Long Term Care over years before they qualify for state aid. Often their children, who may also be frugal and thus able to enjoy comfortable lifestyles, are motivated to buy Long Term Care Insurance.
The Objections to Planning - Perceived “Cons” of Owning LTC Insurance
I’ll never need LTC
Hopefully not! However, if you do, do you have a cogent plan in place for what assets will be liquidated, and how care will be covered from day 100 on? Medicare does often cover days 0-100, but who will pay beyond that?
I may pay premiums for 30 years.
Hopefully so! If you’re that far off from a likely claim, it still makes sense to purchase coverage now, at a younger and healthier age, for your premiums will be significantly lower for each of those 30 years you pay. The plan should be set up with automatic inflation protection to cover the added costs year to year.
I want choice.
Your coverage does not include networks of providers, it’s essentially a benefit account that will pay for most common care settings, with any state licensed provider. Unlike health insurance, there are not networks or providers who will or will not offer you care depending on your insurance. You can select from any care provider.
When we consider that a $1,023 annual premium for a 55-year-old married female in good health provides $175,000 in immediate benefits, which grow to over $500,000 by her 90s, the leverage and value provided by LTC insurance is unparalleled. When combined with the peace of mind a plan provides, it’s easy to understand why so many who know to buy this, do. It’s those who are not even aware of the problem that fail to plan.
In evaluating whether you should consider an LTC insurance policy, consider the concept of large mistakes versus small mistakes.
A big mistake could be not planning ahead for Long Term Care can cost you hundreds of thousands of dollars. A small mistake would be buying a Long Term Care plan when in reality you didn't end up needing LTC and paid premiums for many years.
Consider the above graph of premiums paid versus the LTC benefit pool after 20 years. Based on a 55-year-old married male.
If the possibility of wiping out all of your savings paying for Long Term Care is unappealing, you can buy an affordable LTC policy that will provide security, and let you focus on other retirement objectives.