“I cannot wait to pay the premiums for my homeowner’s, car, and long term care insurance policies,” said NOBODY ever. Insurance is one of those “necessary evils,” that we spend money on while at the same time hoping that we never have to actually use the policy. With homeowner’s and car insurance, we are often compelled by the bank to obtain coverage, so we do it. With long term care insurance, it is optional.
Here are the eye-opening facts. As the Baby Boomer generation ages, medical science continues to improve our chances of longevity, the cost of care continues to increase, and the chances of requiring long term care is real. The latest statistic is that every day until 2030, 10,000 Baby Boomers will turn 65, and 7 out of 10 people will require long term care sometime in their lifetime. How to pay for this care is a problem that should be considered long before it happens. Genworth publishes a Cost of Care Survey each year for the past 15 years, showing the cost trends of different care options, such as assisted living facilities, nursing homes, adult day care, and home-based care.
As a financial planner who is very concerned about the threats that face my clients, I encourage them to build a long term care plan into their overall financial plan. The cost of care is a factor that must be planned for in case it happens, but equally important is how to maintain dignity for the person who needs care and how to ensure the stress of caring for loved ones is properly addressed. Unfortunately, many people still think that their children or spouse can adequately care for them in a long term care situation, and the depth of the issues that arise in these circumstances are not considered realistically. Children may not be able to care for parents who live in a different city or even if they live in the same house. In circumstances that involve dementia, round-the-clock care is often needed. On 60 Minutes, there was a 2018 episode illustrating the story of a man who tried desperately to care for his wife who was afflicted with Alzheimer’s. The series of interviews for this episode took place over a period of 10 years to follow the progress of this couple who was married for over 50 years, starting before her symptoms arose and extending to the point where she was in the throes of the disease. Early on, the husband insists with great sincerity that he would never consider letting anyone else take care of her. As time passed, and his wife fell into the clutches of the disease, it is heartbreaking to watch the toll the caregiving takes on him, and his agony as he realizes he cannot do it alone.
What is the best way to mitigate this very significant threat in a good retirement plan? There are many different kinds of long term care policies from reputable companies that provide good coverage for a fraction of the cost of the care that would otherwise be required. Offloading this risk to an insurance company may be the most practical answer for most people and a huge relief for their children. When is the best time to put the coverage in force? Should it be done now when the actual care may not be needed for another 20-30 years, or would it be better to wait? If you put it in place earlier, you must pay premiums longer in a traditional policy, but the premiums are based on age, so they will be less expensive. Some policies are structured to allow paying for a limited number of years only, not for a lifetime. Most important to consider, long term care policies require that you are in good health without chronic health issues such as back and joint pain that may not seem like a big deal to you but may render you uninsurable from the carrier’s standpoint. Some medical diagnoses can knock you completely out of consideration. Since these policies are priced by the insured’s age and rely on good health to obtain, you are playing with fire to wait. A few years ago, a couple came to my office asking for long term care policies on both. I asked them why they waited until they were over 65, and the husband quickly answered that they waited because their CPA told them that they ought to wait until they turned 65. In the CPA’s view, why pay premiums longer than you need to? Unfortunately, six months earlier, the wife had been diagnosed with an auto-immune disorder that completely disqualified her from coverage. Also, the premiums would have been much less had they put it in place years earlier. For this couple, the CPA should have stuck to preparing tax returns and left the insurance planning and advice to another professional who could have properly advised them.
If you want long term care coverage, do not wait. Call our office and we will let you know if you are a good candidate for coverage and what options you have.
1. “The Guide To Being A Baby Boomer” (seniorliving.org),site accessed 05/14/19.
2. 2019 U.S. Department of Health and Human Services (longtermcare.acl.gov), site accessed 08/28/19