Protecting Your Assets with Long Term Care InsuranceOct 13, 2020 09:06AM ● By MED Magazine
Long term care is one of those topics that is easy to put into the "someday" category. After all, if you are healthy and plan to stay that way, you may never need it, right? However, the facts suggest there is a good chance that you will.
"Recent statistics from AARP suggest that, among those turning 65 right now, over half are going to need some form of long term care services at some point in their lives," says Brad Lupkes, a wealth advisor in the Wealth Management & Trust Department at Frontier Bank.
The question becomes, how will those services be paid for? Right now, the median cost of a room in a nursing home facility in our region stands at $87,600/year. Assisted living is right around $40,000/year. For those who prefer to stay in their homes, they'll pay about $60,000/year for home health care. There is every indication that these costs will continue to rise.
Given that most people who need long term care use it for an average of two years (2.5 for women, 1.5 for men), the costs can add up quickly. For those without a plan to manage these costs, it can mean rapid diminishment of their assets - assets for which they may have had other plans.
"People tend to think that if they go into a nursing home, the government is going to take care of that," says Lupkes. "While Medicaid does help, you have to spend down almost all of your assets in order to qualify."
Long term care insurance can help protect assets by offsetting the cost of care. "If we put it in terms of car insurance, and I told you that you have a fifty-fifty chance of getting in an accident, you would probably go out and buy insurance," says Lupkes
Those with the resources to pay for care out-of-pocket do not necessarily need insurance. Likewise for those with few assets to protect.
"The people who really should consider it are those who have built up a decent nest egg that they want to protect because they want to leave it to their kids or a charity," says Lupkes. "That is where long term care insurance makes the most sense."
But long term care policies vary widely and it is important to get sound advice from someone who understands the financial implications.
Benefit amounts can be set on a per day or per month basis (i.e. $150/day or $3000/month). The 'elimination period' works like a deductible and can be anywhere from 30 days to a year, during which time the policy holder covers the cost of care before insurance kicks in. The level of inflation protection in the policy is another important consideration.
"We can help evaluate all the scenarios," says Lupkes, whose fiduciary responsibilities obligate him to consider clients' best interests only. "If this is something they need, we can refer them to the insurance department or work directly with their own insurance agent to help design a policy that makes sense for that individual."
Above all, Lupkes warns, individuals should not ignore the issue in the hope that it will resolve itself when and if the time comes.
"If you don't have a long term care plan in place, you run the risk of using up a lot of your assets when you might have had other plans for that money," he says.