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Nov 20
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Is Long-Term Care Insurance Worth It?

By Long Term Care

There’s a lot of debate surrounding Long-Term Care (LTC) insurance. What if you don’t need it? Would you be throwing away your money? How will you pay for it? Is it worth it? Those are all fair questions that many people have. But here’s the thing: Waiting could cost you more. As you get older, premiums typically increase and changes in your health could make it more difficult to qualify for coverage.  It might be hard to imagine now, but the reality is someone turning 65 has a 70% chance of needing some type of long-term care. With those odds, it’s worth taking a closer look.

Understanding LTC Insurance

LTC insurance is designed to help cover services that traditional health insurance and Medicare don’t, like the costs of custodial and personal care. It can help pay for care in a nursing home, assisted living facility, or at home, including light medical and non-medical services. For example, LTC insurance with a home care component may cover things like help with bathing, showering, cooking, eating, and taking medications, or even skilled services like physical therapy, or simple companionship or temporary relief for a family care-giver. Policies and coverages vary.

While Medicaid can cover long-term care, it is typically only available for very low-income seniors or individuals with disabilities who meet strict income and asset requirements. Irrevocable trusts can sometimes help families preserve assets, but Medicaid has a five-year lookback period for those. There are strict rules about asset transfers with or without a trust in place, and a single senior can only have $2,000 in cash assets in order to qualify. Sometimes a married couple will even be forced to divorce if one of them develops Alzheimer’s or needs full-time care so that the healthy spouse won’t be bankrupted. An additional problem when it comes to Medicaid for long-term care is that the program is subject to political changes, and can be defunded.

With all of these challenges, the need for planning for long-term care may be even more critical than before.

Types of Insurance Coverage

There are generally two categories of long-term care insurance coverage: Traditional LTC insurance, which is “use it or lose it,” and hybrid policies that combine long-term care coverage with life insurance benefits. These policies typically allow the policyholder to access the life insurance benefit to help cover long-term care costs. If long-term care is not needed, the policy’s death benefit is generally paid to beneficiaries, although any amounts used for care may reduce the final payout. The specific terms and benefits vary by policy and insurer, and sometimes even annuities have hybrid coverage for long-term care.

You typically become eligible to receive long-term care insurance benefits when you are unable to perform at least two Activities of Daily Living (ADLs). This could be needing assistance with eating, bathing, or dressing.  Most policies include a waiting period, also referred to as an elimination period or deductible period, which must be satisfied before benefits can begin.

Things To Consider And Keep In Mind

Depending on your financial situation you may be able to self-fund to pay for long-term care expenses if you need them. But keep in mind that a 2024 Fidelity study estimates that a 65-year-old couple retiring today could need up to $315,000 just for medical expenses alone, a figure which includes Medicare premiums, deductibles and co-pays, but not vision, hearing, dental or long-term care expenses. And the average cost for a shared room in a nursing care facility is more than $9,000 per month.

Two of the biggest barriers to getting LTC insurance can be eligibility and cost. Both can be influenced by factors such as age, health history, pre-existing conditions, and even gender. Because women tend to live longer, they are statistically more likely to need extended care, which can result in higher premiums.

When choosing an LTC policy, think carefully about when to buy and about what features make the most sense for you. Consider your personal and family health history. Has anyone in your family had Alzheimer’s, a stroke, or another serious health condition? Does your family have a history of longevity? Most people who need long-term care do so because of cognitive decline, physical disability, or both.

Your financial advisor will be able to help you look at your overall picture to help you see whether or not you can self-fund to pay for long-term care. They can also help you analyze and compare between the features and costs of many different types of insurance or annuity policies that are currently available.

So, Is It Worth It?      

At the end of the day, it all comes down to your individual risk level and personal financial situation. Like other financial decisions, it’s important to remember that LTC insurance is not a universal solution. Every financial situation is unique; for some, the premiums may outweigh the potential benefits, while for others, like affluent individuals and retirees seeking to protect their wealth and legacy, the case for coverage has grown stronger. The key is to start thinking and planning now, long before the need arises and to consult a financial professional who specializes in retirement and long-term care planning. Planning proactively may provide you with more options than waiting until a critical moment.

Give us a call today and understand your options before you need them! You can reach BayTrust Financial in Tampa at 813.820.0069.

 

This content is for informational purposes only and does not constitute financial, legal, or tax advice. Consult a qualified professional before making any decisions regarding long-term care insurance.

 

Sources:

https://www.aaltci.org/long-term-care-insurance/learning-center/ltcfacts-2025.php

https://www.aaltci.org/news/long-term-care-insurance-news/need-paid-ltc

https://www.nerdwallet.com/article/insurance/long-term-care-insurance

https://www.fidelity.com/viewpoints/personal-finance/long-term-care-costs-options

https://www.reviewjournal.com/livewell/is-long-term-care-insurance-worth-the-investment-3508530/

https://insights.smartasset.com/7-ways-financial-advisor-can-help-plan-long-term-care

https://smartasset.com/insurance/what-does-long-term-care-insurance-cover

https://www.carescout.com/cost-of-care

https://smartasset.com/insurance/should-i-buy-long-term-care-insurance

https://investor.genworth.com/news-events/press-releases/detail/982/genworth-and-carescout-release-cost-of-care-survey-results

 

Nov 28
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Why Long-Term Care is an Important Part of a Financial Plan

By Financial Planning, Long Term Care

It’s National Long-term Care Awareness Month, so it’s the perfect time to discuss the importance of preparing for the potential need for care.

Financial planning can be a complex process, especially for those looking for a comprehensive plan that accounts for every aspect of their life. That comprehensive plan traditionally includes budgeting, investing, tax-mitigation, estate planning, and as you get closer to retirement, should even include Medicare and Social Security. One aspect that often goes overlooked, however, is planning for long-term care, or the potential of needing this extremely intricate, intimate and pricey care. Let’s go over why it’s important to include long-term care planning as part of your holistic financial plan, as well as a few ways you might be able to mitigate the potential of it draining your savings.

It Can Help You Preserve Your Hard-Earned Assets [1,2,3]

The unfortunate reality is that seven in 10 of today’s 65-year-olds will need some type of long-term care, and 20% will need it for longer than five years. When long-term care can cost more than $100,000 per year for a private room in a nursing home, it’s easy to see how even a short-term stay be detrimental to a financial plan by draining savings and upending long-term plans. Preparing early for the possibility of needing long-term care can help you avoid the stress and pressure of scrambling for the funds or clearing out the savings accounts you’ve worked so hard to grow.

It’s Not Covered by Medicare

A common misconception is that long-term care or extended stays in assisted living or nursing home facilities are covered by Medicare. It does cover some stays in skilled nursing care if, for example, a medical condition has necessitated that level of service; however long-term care is considered a lifestyle expense rather than a medical expense, so it’s not covered by the federal program. That means that even if you work with a financial professional to find the right Medicare or Medicare Advantage plan for you, you may still be lacking the coverage you need, again forcing you to foot a bill that can quickly deplete funds for even the most diligent savers.

It May be Able to Extend Your Independent Lifestyle

Planning for long-term care is about so much more than just the care itself. It’s about giving yourself the opportunity to make life-altering decisions in any scenario. A clearly defined plan to pay for long-term care can help you retain your agency and decision-making power, even if you’re no longer capable of living on your own. It can also be helpful to know that you have a plan in place in the event of the worst, potentially giving you confidence and saving you from the stress that can come with having to make a decision and arrange for your care at the last possible moment.

You Can Shoulder the Burden for Loved Ones

Just as your plan is about more than the care itself, your plan is also about more than you. If you create a comprehensive plan that determines how you’ll be cared for as well as how you’ll pay for that care should you need it, your family may not be subjected to the emotional and financial burden that can come with making those decisions at a moment’s notice, especially if your health and capabilities have deteriorated beyond being sound of mind. Additionally, a plan can give your family the same assurance it gives you, as they can potentially gain confidence that you’ll be in capable hands should you need high-level care for an extended period.

You May Prepare and Gain Access to Better Care

The flexibility you offer yourself by preparing early can also give you access to the quality of care you need, whether that be at-home care or assistance in a long-term living or nursing facility. It can also help you build the financial resources or secure a spot if you need a specific level of care, such as memory care, that often sees openings fill quickly at the best facilities. Furthermore, depending on the saving vehicle you use, you might be able to build more assets you can use to fund your stay. Those funds might help you relieve the stress of finding new methods of payment, relocating to a different facility or falling into the hands of a family member who likely isn’t capable of providing you with the assistance you need.

There Are Modern Options to Pay for It

Modern times have brought about innovative solutions to pay for long-term care. Long-term care policies of old still exist, giving policyholders the option to pay premiums for a service they may never use, but now, long-term care insurance can be tacked onto other types of insurance products, such as permanent life insurance policies, to combine benefits. This means that your long-term care policy can come with the same features as permanent life insurance. This is important because it can potentially eliminate the “use-it-or-lose-it” aspect of long-term care policies of old. The cash value portion of the hybrid policy that is protected and guaranteed by the claims-paying ability of the issuing insurance carrier can be used to pay for long-term care if you need it or as a death benefit for your beneficiaries if you don’t. It’s still important to work with a financial advisor to see if one of these hybrid policies matches your goals.

If you have any questions about how you can prepare to fund long-term care, please give us a call today! Give us a call today to explore your options. You can reach Drew Capital Group in Tampa at 813.820.0069.

Sources:

  1. https://www.genworth.com/aging-and-you/finances/cost-of-care.html/
  2. https://acl.gov/ltc/basic-needs/how-much-care-will-you-need
  3. https://www.theseniorlist.com/nursing-homes/costs/

 

Life Insurance: Several factors will affect the cost and availability of life insurance, including age, health, and the type and amount of insurance purchased. Life insurance policies have expenses, including mortality and other charges. If a policy is surrendered prematurely, the policyholder also may pay surrender charges and have income tax implications. You should consider determining whether you are insurable before implementing a strategy involving life insurance. Any guarantees associated with a policy are dependent on the ability of the issuing insurance company to continue making claim payments.

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