Long Term Care Insurance
Look the following statistics. If they don’t scare you into taking a long look at obtaining some kind of long-term care insurance (LTCI), nothing will.
- On average, 69% of people age 65 or older will need some form of long-term care.
- The average daily cost of a private nursing home room in 2008 was $217 or $79,205 annually.
- However, in some states the cost is much higher: Alaska ($183,595), New York, NY span style=”text-decoration: underline;”>$160,965), Stamford, CT ($148,920), California ($100,000), and Pennsylvania ($93,075).
- Americans who are 65 years old and older and have incomes greater than $20,000, only 16% have LTC insurance.
- “Failure to prepare for the cost of a nursing facility stay or other long-term care is the primary cause of impoverishment among the elderly.” (The American Health Care Association, 1997)
Do you have LTCI? Based on the statistics, we know for most the answer is NO.
Should you have LTCI? Based on the statistics, we know the answer is YES! If the average cost of a nursing home stay is $80,000 a year, how many years do you have to stay in that home before spending a good percentage or if not all of your wealth?
Why don’t people purchase LTCI? There are really two reasons people do not buy LTCI. 1) Cost. It can be expensive. 2) Need. Many people have the “it won’t happen to me” attitude when it comes to the need for LTC expenses.
The sad truth is that the people who buy LTCI are people who have had a loved one or a friend who felt the devastating effects of LTC costs and didn’t have LTCI.
What does LTCI cover? It depends on the policy purchased. Some cover only nursing home care while others cover in-home care as well as a number of other expenses. The coverage will have a limit (usually a daily or monthly limit).
What triggers LTCI coverage to kick in? Typically, it’s when you can’t perform “2 of 6 ADLs.” ADL stands for activities of daily living: Bathing, Dressing, Toileting, Transferring, Continence, and Eating without help.
There are several different ways to obtain LTCI coverage. Depending on your situation, one may be better for you than another.
Traditional LTCI—this is the best but also the most expensive type of LTCI. You pay an annual premium of $2,500-$10,000+ a year (depending on your age); and if you incur LTC expenses, the policy will pay up to its daily limit. Traditional LTCI is like term life insurance. If you don’t use it, you do not get the premiums back.
Single Premium Life Insurance policies that have LTC benefits—most people are not aware of the fact that they can purchase a life insurance policy that has a LTC benefit. Why would you purchase this type of policy? Because if you ever need the money you paid in premiums it’s accessible. That’s right. If you paid a $200,000 one-time premium for a policy and needed the money in years two, three, or whenever, you could ask the insurance company for a refund of your entire premium.
Additionally, some policies grow money in the policy similar to money market/certificate of deposits. This type of policy is a good fit for an older client who has money sitting in CDs and money market accounts because they think they may need the money some day and, therefore, do not want to allocate it to buying traditional LTCI.
To view/listen to a video presentation on SPL policies, please click on the picture below.
Retirement Life™ (RL)—as you can read by clicking here, growing wealth through the use of RL can be a terrific idea for many. A nice byproduct of using a RL is that the policy comes with a FREE LTCI rider. Essentially, if you can’t perform 2 of 6 ADLs, the insurance company will give you 2% of your death benefit early (tax free). This type of coverage is not as good as a traditional LTCI policy; but if you are buying a policy to build wealth, why not buy one with a FREE LTCI benefit?
Deducting the cost for LTCI
Most people do not know how to write off traditional LTCI premiums. While not everyone can do so, some can. If you would like to learn how to obtain a 100% deduction for LTCI premiums, please click here.
We hope that after reading this material you are sufficiently motivated to learn more about LTCI. Our firm specializes in helping clients find the right LTCI benefit at the lowest possible cost. If you would like help, please e-mail [email protected] or call 269-216-9978.