By Dr. Keisha Chambers
Faculty Member, Business Administration, American Public University
Long-term care (LTC) is not just care for the elderly. What if your 40- or 50-year-old spouse suddenly had a stroke? Are you prepared for the cost of care and therapy needed to help your spouse recover while maintaining your financial responsibilities, even with the loss of income? We all need to realize that good health is not a given, and anyone’s health status can change in an instant.
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Most long-term care covers assistance for the activities of daily living (ADL). They include bathing, dressing, eating, transferring the patient from bed to chair and vice versa, toileting, and continence. A long-term care insurance policy is valuable when someone is unable to perform at least two of these six ADLs.
A 2019 cost of care survey conducted by Genworth found that by 2039, the median cost of care will skyrocket 81% for in-home care, community, and assisted living and nursing home facilities.
Long-Term Care Policies Are Changing
Long-term care policies have changed over the years. Traditional policies “entail paying an annual premium in return for financial assistance if you ever needed help with day-day activities.”
However, these policies have become unattractive not only because of the minimum daily benefit, but also due to financial losses to the insurer. A more popular approach – and an option that gives the owner more control – is a LTC policy that provides the insured with a monthly payment for a set period of time. This allows policy holders to spend without restrictions. This type of policy has various names depending on the issuer.
For example, Nationwide’s product Care Matters “is designed for clients between 40 and 75 and linked to a fixed premium universal life policy. It is ideal for clients seeking LTC coverage with flexibility of benefit use and a death benefit that will always return to loved ones at least the premium paid if the LTC benefits are not used,” says Nationwide.
This type of policy allows the insured to select and receive a set amount for a set period of time. Premiums can be spread out over five, 10 or 20 years. The policy kicks in once a doctor attests that the insured is unable to do two of the six ADLs.
With this type of policy, if it is not going to be used, policy owners can get back the money they have put into the policy (via the return of premium rider). In other words, the money is yours; it’s not lost, unlike most traditional policies.
Long-Term Care Policies Should Be Personal
When selecting a LTC policy, make it personal. It’s important to consider family history, including hereditary diseases such as cancer, diabetes, Alzheimer’s, sickle cell anemia and others.
As you’re determining which plan works best for you, remember that a LTC policy is about balance – determining what you can afford, other insurance policies you have and your savings/retirement portfolio.
Think of LTC as a cost-effective way to protect yourself, along with your assets from the ever-rising cost of home healthcare, assisted living and nursing home costs. The right LTC policy can provide peace of mind when you approach and enter retirement.
Where to Start Planning Your LTC Policy
- Determine the estimated cost of care. Visit the Cost of Care Survey and enter your city, state, and or zip code and determine the estimated cost of care based on your specific timeline (i.e., 10 years, 20 years and so forth).
- Determine how much you can afford and how long you want to pay. Is it in your best interest to pay the policy in full during your money-making years versus extending the cost into retirement? Keep in mind that younger you are when you purchase an LTC policy, the lower the premiums.
- Talk to an agent. Stark recommends that you talk to an “independent agent who sells policies from multiple companies rather than a single insurer.” That will give you more options that fit your personal and financial needs.
So start planning today for the care you want in the future.
About the Author
Dr. Chambers has a Ph.D. in organization and management and a master’s degree in family financial planning. She has worked and taught in various management capacities, including management consulting and program management.