Part of wealth protection is being insured properly. This typically involves home, auto, health and often liability, life and long-term care insurance. Long-term care insurance pays for services that help individuals who are unable to perform certain activities of daily living without assistance or who require supervision due to a cognitive impairment such as Alzheimer’s disease. Long-term care expenses are generally not covered by health insurance, Medicare or Medicaid.
The U.S. Department of Health and Human Services has determined that almost 70% of people turning age 65 will need long-term care at some point in their lives. This is about 45 million people or about one in every seven Americans. Of the over-65 crowd, approximately 4 million people have purchased long-term care insurance. This exposes about 40 million over-65 Americans to potentially catastrophic costs.
Why haven’t more people purchased this insurance? The reasons vary, but they include a desire not to think about such issues, the notion that they can pay these costs out of pocket should they arise and the reluctance to spend money on something that they may never use. If you’re among the 80% of the over-65 population that doesn’t have long-term care insurance, you should consider the impact of large unplanned medical expenses.
For those who understand the value of long-term care insurance, financial planners have typically recommended a traditional long-term care policy. These have been available for a fixed lifetime rate and they can have reasonable caps on the coverage and can offer an inflationary increase.
In the last few years, long-term care policy purchases have significantly dropped. This is at least partly based on the decreased coverage and increased costs of the policies that are currently offered. Long-term care policies are being partially replaced by a new product that is often referred to as a hybrid or combo long-term care policy. These are basically life insurance and annuity policies that have long-term care riders available. They combine traditional long-term care insurance with a death benefit. They are still inferior to pure long-term care policies in several ways — including a lack of inflation protection. Also, as you might guess, they typically cost more than pure long-term care policies. However, they are certainly better than no coverage at all and they address the concern of people who dislike spending significant amounts of money on something they may never need.
The statistics in this article have been focused on those who are over 65. However, there are several excellent reasons to obtain long-term care insurance at an earlier age. After deciding when to start, we need to think about whether to get a traditional long-term care or a hybrid policy. Once that’s decided, a highly-rated company with appropriate coverage needs to be selected. Fortunately you don’t have to figure this out on your own. Guidepost Financial Planning is able to help you with this and all other aspects of your financial planning. Please visit our website or give us a call at 970.419.8212 so that we can discuss your financial goals in a no-charge, no-obligation initial meeting.
This article is for informational purposes only. This website does not provide tax or investment advice, nor is it an offer or solicitation of any kind to buy or sell any investment products. Please consult your tax or investment advisor for specific advice.