Long-term insurance improving
February 20, 2013
With the baby boomers retiring in droves over the next 10 years and their parents using up assets to pay for their own long-term care costs, many are starting to wonder how they will cover their own long-term care costs when they start needing it.
Fortunately, there are more and better ways to insure at least a part of the costs that statistically 60 percent of us may need in the future. There are three basic options when it comes to funding long-term care costs. You can self insure, but you may need in excess of $72,000 annually for each person, and most of us don't have that kind of money.
You can insure the risk, or you can go broke and have the state pay for your care and possibly take the house once you and your spouse have passed away, leaving nothing for your heirs.
The best alternative for most of us is to insure the risk. For most of us, a traditional term type of insurance will give us at least some of the protection that we may need in the future. For example, last year I obtained a policy for a 65-year-old single, female client. Should she ever need it, she will have $200 per day in coverage that will help keep up with inflation and provide at least three years of coverage.
When she first heard that it would cost about $4,200 a year, she was not sure it was affordable. I explained to her that even if she paid premiums for 25 years, or at least $106,000, she would have access to no less than $219,000 of benefits should she need it. She understood that it made sense, given the risk that she would need it and had no one to take care of her. These policies are even better if you are married because you can get up to a 40 percent discount, which means you can insure two people for a little more than the cost of one. Like term insurance, there is no cash value should she die before using any of the benefits. Another option for clients who have excess cash is to purchase the asset-based version. This option uses a single premium universal life policy that has a long-term care insurance rider. This option can multiply the amount of money available for long-term care and pay a death benefit should the insured die before needing care. Recently, I placed a policy with one of our clients in the Bay Area. He is 54 years old and in good health. With a single premium of just over $80,000, he now has access to $432,000 for long-term care insurance that will pay up to $6,000 per month for no fewer than six years. Should he die before needing the care, his beneficiary may receive $144,000 or more. These are just two examples of the many clients we have helped with their long-term care needs. Today there are long-term care insurance policies to fit almost any budget, and now is the time to at least learn about the risks and options to address those risks. At the end of the day, it is health that buys LTC, money just pays for it.