Is Long Term Care Insurance Right for You?

Is Long-Term Care Insurance Right for You?

As CERTIFIED FINANCIAL PLANNER™ professionals we’ve often been asked to create a scenario we call “Provide Care” when creating client’s financial plans. Clients want to understand the impact disability, dementia, or other chronic illnesses may have on their financial plan. Does it mean selling their house if a spouse needs memory care? Where would they go? Are there enough resources to afford in-home care and if so, for how long? All valid questions as we rarely know what the future will hold. Part of our job is to help you choose the best strategy to address potential adverse events in the context of your overall financial plan.

That’s where Long-Term Care Insurance (LTCI) can play a role. LTCI is designed to cover the costs of extended care services, including nursing homes, assisted living, memory care, and in-home care. The cost of long-term care can be staggering, with nursing home expenses exceeding $100,000 per year and memory care costs of more than $180,000 per year in some areas. LTCI helps protect personal savings and assets from being depleted by these expenses, providing financial security for policyholders and their families.

When a person requires long-term care, the initial responsibility often falls on family members. LTCI helps alleviate this burden by covering professional care services, reducing the physical, emotional, and financial strain on loved ones. Some policies only cover specific types of care, leading to unexpected out-of-pocket costs if policyholders require services not included in their plan. If staying in your home or being cared for by a family member is important to you, confirm whether in-home care by a family member or non-medical professional is a covered expense.

LTCI requires medical underwriting and has strict eligibility requirements. The best time to buy is typically in one’s 50s or early 60s, but even then, approval is not guaranteed. When buying a LTCI policy, ask if (1) benefits are inflation protected, ensuring benefits increase over time to keep up with rising care costs; (2) waiting periods are as short as possible, preferably 90 days or less, so that coverage kicks in sooner rather than later; and (3) daily benefit limits match those for facilities in your area as costs vary widely throughout the nation. LTCI often comes with high premiums, which may or may not be level throughout the life of the policy. If you may not be able to afford premium increases, be sure to buy a level premium policy so you don’t lose your long-term care coverage just as you enter the phase of life when you may need it. If you do decide on LTCI, choose a reputable insurance company with strong financial ratings to ensure they can pay claims when needed. Last, traditional LTCI policies are “use it or lose it.” This may not be the case if you buy a traditional Life Insurance policy with a Long-Term Care rider, an alternative to consider.

LTCI can be a valuable tool for protecting assets and ensuring access to quality care, but it is not the right choice for everyone. Before purchasing an LTCI policy, reach out to your Portfolio Manager for a review. Your PASI team is here to help you evaluate the costs, benefits, and alternatives. Understanding the key attributes of a strong policy can help buyers make an informed decision that aligns with their financial situation and future care needs.