As you navigate the path towards a secure and comfortable retirement, it's essential to consider all aspects of your financial future. One crucial aspect that often gets overlooked is the need for long-term care coverage. For most of us that are fortunate enough to live a long life, it's not a matter of if we will have a long term care event, but more a matter of when we will have it. When it comes to paying for long term care, we all have two options:
- Self-insure by spending down our assets
- Purchase long term care insurance to protect our assets
Investing in a long-term care insurance policy can bring value and peace of mind to you and your loved ones.
Long-term care needs are an increasingly important consideration as we age. While we all hope for the best, the reality is that unforeseen health challenges can arise, requiring specialized care and assistance. Without proper planning, these costs can quickly erode our hard-earned savings, leaving us financially vulnerable precisely when we should be enjoying the fruits of our labor.
This is where long-term care insurance steps in. By acquiring a comprehensive policy, you're ensuring that you have a dedicated resource to cover the expenses associated with long-term care services, such as nursing home care, assisted living, and in-home care. The financial strain that such services can put on families is significant, and having a safety net in place can alleviate this burden. Moreover, you're preserving your assets and savings for other essential aspects of retirement, whether it's traveling, pursuing hobbies, or simply spending quality time with loved ones.
Long-term care insurance doesn't just provide financial security; it empowers you to make choices about your care with dignity and independence. You'll have the flexibility to select the type of care that aligns with your preferences and values, ensuring your well-being on your terms.
If you haven't watched or listened to Episode 3 of The Complete Wealth Management Podcast, check out Dave Alison's interview with Elder Law Attorney & Long Term Care Expert Harley Gordon by clicking here.
Purchasing long-term care insurance is a big decision, and you may have questions about the types of policies available, costs, and benefits.
At Alison Wealth Management, we are here to help guide you through this process and provide you with the information you need to make an informed choice. Together, we can tailor a policy that aligns perfectly with your needs and financial goals.
The key is not to wait until the need for long-term care arises to address this critical aspect of your retirement plan. By taking proactive steps today, we can safeguard your future and the well-being of your loved ones.
By securing long-term care insurance, retirees not only ensure access to quality care without draining their resources but also gain greater control over their future healthcare choices. Without this protective layer, the unpredictability of long-term care costs could jeopardize retirement goals, leaving individuals and their loved ones grappling with financial strain during an already vulnerable stage of life.
There are 3 main types of long-term care insurance:
- Traditional LTC Insurance
- Asset-Based LTC Insurance
- Life Insurance with LTC Rider
Traditional LTC Insurance: Traditional long-term care (LTC) insurance is a standalone policy specifically designed to cover the costs associated with long-term care services, such as nursing home care, assisted living, and in-home care. Policyholders pay regular premiums, and in the event they require long-term care services, the insurance policy helps cover those costs up to a predetermined daily or monthly benefit amount. If the policyholder does not end up needing long-term care, they may not receive any benefits, and the premiums paid could be considered a sunk cost.
Asset-Based LTC Insurance: Asset-based LTC insurance, also known as hybrid LTC insurance, combines elements of traditional LTC insurance with a life insurance policy. With this type of insurance, policyholders pay a lump-sum premium or a series of premiums. If they require long-term care, the policy provides benefits to cover those costs. If not, the policy can still offer value. In the case of a life insurance-based policy, the policyholder's beneficiaries receive a death benefit if the policyholder passes away without using the LTC benefits. If the policyholder receives LTC payments during their lifetime, those payments reduce the net death benefit dollar for dollar. For example, if there was a $250,000 death benefit and the policy holder accessed $150,000 of LTC benefits and then passed away, the policyholder’s beneficiary would inherit the net $100,000 death benefit.
Life Insurance with LTC Rider: Life insurance policies with LTC riders are essentially life insurance policies that include a long-term care rider. A rider is an optional feature that can be added to a life insurance policy to provide additional benefits. In this case, the LTC rider allows policyholders to use a portion of the life insurance death benefit to cover the costs of long-term care services if needed. If long-term care is not needed, the policy functions as a regular life insurance policy, providing a death benefit to beneficiaries upon the policyholder's passing. If the policyholder receives LTC payments during their lifetime, those payments reduce the net death benefit dollar for dollar. For example, if there was a $250,000 death benefit and the policy holder accessed $150,000 of LTC benefits and then passed away, the policyholder’s beneficiary would inherit the net $100,000 death benefit.
Each of these types of long-term care insurance has its own advantages and considerations. For example:
- Traditional LTC insurance provides specialized coverage for long-term care needs, but some people may be concerned about the potential for premiums to increase over time, which is very common.
- Asset-based LTC insurance offers the possibility of receiving benefits for long-term care or leaving a legacy, depending on the situation.
- Life insurance with LTC riders combines life insurance with the flexibility of using some of the death benefit for long-term care expenses.
When we work with a client to design a long-term care plan, we start with the decision and analysis to self-insure (by not purchasing long-term care insurance and spending assets down if an extended care event is needed) vs transferring the risk and cost of an extended care event by purchasing long-term care insurance. We analyze all three different options to build a custom plan that meets your needs.
If you have questions on your long-term care plan or insurance, please don't hesitate to reach out by booking an introductory call here.