Black & LoBello

It might sound strange to be told to insure retirement funds but, after working hard and diligently saving all that money, it’s worth it to make sure those funds will be available when needed.  With the transition into retirement comes the heightened possibility of age-related health problems. Unforeseen events such as stroke, heart disease, and cognitive impairment can change one’s way of life.

Many people are under the impression that government programs such as Medicare or Medicaid will cover the costs of long-term care. Medicare will cover some skilled nursing for a very limited period (20-100 days only). Medicaid will only cover long-term care costs for impoverished individuals with the caveat that there are legal planning techniques that work within the complicated Medicaid rules.  Regular health insurance does not cover nursing home or other long-term care costs except forshort-term rehabilitation.

Out-of-pocket costs for needed long-term care resulting from age-related health problems such as home care, nursing home, or assisted living can quickly deplete retirement funds and leave the remaining healthy spouse impoverished.

Long-term care insurance insures your retirement funds and provides protection so that the money stays intact while, at the same time, provides money for elder care services. In his book The Total Money Makeover, Dave Ramsey says of long-term care insurance, “If you are over sixty, buy long-term care insurance to cover in-home care or nursing home care. The average nursing home stay costs $40,000 (In Nevada over $70,000!) per year, which will crack and scramble a nest egg in a heartbeat.  Dad in the nursing home can use up Mom’s $250,000 savings in just a few short years.”

Using long-term care insurance to insure your retirement makes sense. You insure your car against damage, your home against fire, and you purchase life insurance.   Why not insure what can be the largest and most devastating risk to you and your family?  Unlike other risks you insure against, long-term care is the most likely to happen. Long-term care insurance will also help you keep your independence and dignity and allow you to make choices about where you want to spend your final years.

Here are some specific reasons for buying long-term care insurance:

• If you are married and you have a need for long-term care, your spouse will be able to pay for an outside caregiver and receive needed rest and recuperation.
• If your children promise to take care of you, then when the time comes that you need care, insurance will help them do that by paying for aides to help with tasks such as bathing and incontinence.
• If you are single and a need for long-term care arises and you have no family who can help you, insurance can pay for and coordinate that care.
• If you have the desire to leave assets behind when you die, insurance will help preserve those assets from the cost of long-term care.

You should also consider buying long-term care insurance at a younger age. There is an advantage for doing this.  The premium is lower.  For example, a person, currently age 45, buying a typical policy with a spouse, could spend $21,146 in total premiums to age 78. Suppose this same person chooses to wait to buy the equivalent coverage at age 65.  If that same policy were available in the future, the couple that waits could pay $52,566 in total premiums over their 13 remaining years to age 78. Because they waited, they would pay 2 ½ times more for the same policy.  In addition to the rates going up with age, the health qualifications will be stricter and development of health problems related to aging may even disqualify a person from obtaining a policy.

There are dozens of long-term care insurance companies selling a multitude of different policy options. It can become very confusing.  For each policy, there are literally thousands of benefit combinations for home care, assisted living, nursing home care, waiting periods, payment amounts, inflation riders, and the list goes on.

LONG-TERM CARE INSURANCE BUYING CHECKLIST

Here is a checklist of some of the things you need to know before you purchase a policy.  The more “yes” answers you get the better off you are.

1. Is the insurance company rated by A. M. Best (the rating company) with a rating of at least A, A+ or A++?
2. Is it a large diversified company with deep pockets and selling more than just long-term care insurance?
3. Is the insurance representative an expert in long-term care insurance? (Because of its complexity, almost all LTCi experts only sell LTCi; they seldom sell anything else.)
4. Does the representative have a degree and/or industry financial designations?
5. Does the representative own a personal long-term care insurance policy for himself or herself?
6. Is the policy you like tax qualified, and if not, do you understand the ramifications?
7. Are there at least 6 ADLs (Activities of Daily Living) allowed for in the benefit certification?
8. Does it allow “standby assistance”?
9. Is it a “pool of money” as opposed to a “stated period”?
10. Is it “integrated” as opposed to “2-pool”? (2-pool is not allowed in many states.)
11. Do you understand how the elimination period works? (This is extremely important.)
12. Does it have prohibitive cost containment provisions?
13. Is there any “capping” or other future reduction of automatic benefit increase riders?
14. Do you understand how the waiver of premium works?
15. Does the assisted living facility benefit pay the same as for nursing home?
16. Are you buying adequate home care coverage?
17. Does the company have a history of premium rate stability without periodic increases?
18. Does the policy pay for homemaker services?
19. Does the policy offer an alternative plan of care for services that don’t exist today?

Tiffany N. Ballenger, Esq.