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Asset Preservation – Long Term Care

Here are eight longevity issues people become concerned about as they age. Go through the list and see how many you would put on your own list.

  • I don't want to lose my financial independence.
  • I don't want to give up my right to make my own healthcare choices.
  • I don't want to expose my spouse to financial hardships.
  • I don't want to be a burden to family members in the future.
  • I don't want to sacrifice lifestyle goals because retirement income isn’t secure.
  • I don't want to have to cut into the financial legacy I built for my family.
  • I don't want to tie up my money, I want to free it up.
  • I don't want to fail to plan the last part of my life after successfully planning to get here.

So, why do people overlook the advantages of Long-Term Care insurance?

Here are six reasons people typically give for not securing the potential risk of requiring long-term care. 

  • I'm willing to gamble that I won’t need long-term care.
  • I'm confident my family will take care of me.
  • Long-term care only covers nursing home costs.
  • Medicare will cover my long-term care costs.
  • It's too expensive.
  • I can afford long-term care without coverage.

Now think again by asking yourself the questions below.

1. What are the real chances you will not need Long-Term Care?

  • The life expectancy of Americans is rising.
  • The longer you live, the more retirement income you will need.
  • The longer you live, the higher the probability you will need long-term care.
  • 31% of claims start between ages 70-79, and 59% of claims start after age 80. [American Association for Long-Term Care Insurance, "The Sourcebook for Long-Term Care Insurance Information," June 2010]
  • The lifetime probability of becoming disabled in at least two activities of daily living or of being cognitively impaired is 68% for people age 65 and older. [AARP Public Policy Institute. "Beyond 50.03: A Report to the Nation on Independent Living and Disability," April 2003]

2. Do you want to depend on your family for your Long-Term Care needs?

  • Unless you and your spouse have a wide difference in ages, it is unlikely that one of you will be physically capable of taking on significant custodial care duties.
  • Factors like our mobile society, two-parent incomes, high divorce rate, blended families, and delayed childbirth make it very difficult for children to commit to the long term care of their parents.
  • Families are better suited to be the supervisor of your care, not the provider.
  • 180,000 Americans received benefits from their long-term care insurance policy and $6.0 billion in claims were paid in 2008. [American Association for Long-Term Care Insurance, June 2009]

3. What does Long-Term Care actually include?

  • Long-term care focuses on caring rather than curing.
  • Long-term care is for chronic conditions where little or no progress is expected.
  • While these conditions are associated with older people, younger individuals commonly use long-term care for accidents and illness.
  • The most common reasons for which claims were paid in 2008 were Alzheimer's, stroke, arthritis, circulatory issues or injury. [American Association for Long-Term Care Insurance, "The Sourcebook for Long-Term Care Insurance Information," June 2008, based on a Society of Actuaries Study]
  • Long-term care is custodial care for basic activities of daily living - whether at home, adult day care, an assisted living facility, or in a nursing home.
  • In 2009 42% of benefits were paid for home care, 30.5% for nursing home care and 27.5% for assisted living [American Association for Long-Term Care Insurance, "The Sourcebook for Long-Term Care Insurance Information," June 2010]
  • No one wants to go to a nursing home until it's the only choice. Everyone would prefer home care or assisted living for as long as possible and long-term care insurance keeps that choice open.

4. Which long-term care costs are covered by Medicare, Medicaid, health insurance, and disability insurance?

  • Medicare covers hospital care and rehab care for a limited time but was never intended to cover long-term care costs.
  • Medicaid covers long-term care costs only for the indigent, so you must spend down almost all your money to qualify.
  • Health or disability insurance do not cover any long-term care costs.

5. Is long-term care insurance affordable?

  • Long-term care insurance policies reimburse your long-term care expense. You purchase a pool of money (or unlimited) to use in the future. The pool can increase each year to keep pace with inflation without a planned increase in premium.
  • Premiums depend on the level of care you want to fund and your age and health at the time the policy is issued.
  • The earlier you purchase coverage, the lower your premiums will be.
  • Over 76% of policies are purchased by people between 45 and 64 years old. [American Association for Long-Term Care Insurance, "The Sourcebook for Long-Term Care Insurance Information," June 2010]
  • Affordability is a relative concept—the more long-term care costs you encounter, the more affordable the coverage will seem.
  • One measure of value is the security of having a fund for long-term care costs, so that your retirement and legacy goals can be achieved.
  • Policies with certain features in certain states are called Partnership policies and allow you to protect your assets from Medicaid recovery.

6. Who can truly afford long-term care without any insurance?

  • The highest cost item of long-term care is nursing home care, which varies regionally and by facilities, but a commonly cited figure is $100,000 per year. Twenty years from now, this figure rises to over $250,000 per year with 5% annual increases in cost.
  • If you need extended coverage over several years, the impact on your retirement assets could be very significant.
  • Even people who have sufficient assets for the worst-case scenarios often prefer to purchase long-term care coverage to transfer the risk and preserve their other assets for their intended purpose.

Long-term care raises many questions. The information we provided above is designed to help you understand long-term care, but the next step is to help us understand you. When your specific goals and your circumstances are factored in, we can help you make sound decisions and implement an effective plan.

Guarantees and benefits provided by life insurance products are subject to the claims-paying ability of the issuing insurance company.