As an Adviser Investments client, you’re accustomed to taking the long view when it comes to financial planning. That’s a smart move given that medical advances mean we’re living longer than previous generations.
Even though a recent report suggested life expectancies have actually fallen by 18 months, the facts are still sobering: A person turning 65 today has a near 70% chance of needing long-term care (LTC) services at some point. And with a room in a private care facility averaging more than $100,000 a year, the cost is consequential. Medicare and supplemental insurance only pay for “medically necessary” nursing or home care but not the more involved (and expensive) daily needs such as bathing and dressing.
Fortunately, you can protect yourself, your family and your financial legacy with LTC insurance. It covers a broad range of services that other insurance won’t, from home health care and modifications (e.g., wheelchair ramps) to assisted living and residential care.
If you are interested in LTC insurance, here are five key factors to consider:
- The track record of the insurer. The insurance company you choose should have a high credit rating—look for an “A” rating or better on ambest.com and a record of on-time payment of claims.
- How benefits are paid. Benefits can be paid three ways—reimbursement, indemnity or cash. A reimbursement policy will pay a percentage based on the amount of your bill or the daily limit on your policy, whichever is less. Indemnity plans require proof of services but pay the full daily benefit regardless of the cost of your care. Cash plans offer the most flexibility but are also the most expensive. Once you qualify, the daily or monthly benefit is paid to you without any restrictions or receipts. If you expect to receive care from a friend or relative, the flexibility that cash policies provide may be the way to go.
- How the plan is administered. It is important to understand not only how much your benefits are worth, but also how long they will last and whether they are paid out monthly or daily. Monthly benefits are becoming more common because they afford greater flexibility if you don’t need the same level of care every day.
- Length of waiting period. The “elimination period” is the number of days you must wait before a policy starts paying—90 days is most common. To minimize premiums, consider an elimination period that starts paying you back after you’ve used a reasonable amount of your personal assets.
- The impact of inflation. Private nursing home costs have risen about 62% over the last 16 years and costs of assisted living facilities are up 79% over the same period. If you are purchasing a policy when you are young (say in your early 60s), make sure your benefits include inflation protection.
If you would like more information on LTC insurance as part of your comprehensive financial plan or want help evaluating your current policy, please contact your wealth management team. As The Planner You Can Talk To, we’re always happy to help.
And for more on this topic, check out the Protecting Yourself With Long-Term Care Insurance episode of our podcast.
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