There is a common saying that time heals almost everything. Yet, even as we embark on the fifth year since the pandemic began, most of
Long-Term Care Insurance: The Basics
Published Date : April 29, 2014
For many of our clients approaching their retirement years and beyond, this question is starting to come up more and more: How will I pay for my long-term care if and when I need it? According to the Department of Health and Human Services, 70% of people turning sixty-five can expect to use some form of long-term care services during their lives. Women typically need care longer – 3.7 years versus 2.2 years for men. The issue of how to pay for this care is even more pressing for clients with a parent who has needed or currently needs care.
Even for clients with significant assets, the desire to “self-insure” is a scary proposition given the current environment of rising health care costs and longer life expectancies. While I am happy to help my clients with hypothetical cash flow scenarios to determine if self-insuring is a reasonable alternative, many don’t want to see their portfolios drained to cover their care. The question quickly turns to: Should I have long-term care insurance? While this is a personal decision that will be different for everyone based on family medical history, it should be thoughtfully considered. At Sand Hill, we work closely with long-term care insurance professionals to help clients determine if there is a policy that is appropriate for their situation.
If you are unfamiliar with the basics of long-term care insurance policies, below are some important things to know:
- Most policies begin to pay benefits when you are unable to complete at least two of the six Activities of Daily Living (ADLs) without assistance: bathing, dressing, eating, transferring (as from the bed to a chair), and toileting or when you begin to have cognitive impairment.
- Benefits cannot be accessed until you have passed your policy “elimination period”. This is typically between 30 and 90 days —as determined by you when the policy is written—when you must cover the cost of care out of your own pocket. As expected, the shorter the waiting period, the more expensive the policy.
It is important to know that not everyone will qualify for long-term care insurance and policies require medical underwriting. Premiums are typically based on your age at the time the policy is written, daily maximum benefit, maximum time period of the policy, the maximum lifetime benefit, and whether or not there is an inflation increase to benefits.
Most long-term care policies written today allow for both in-home or facility care. If you are like most people, you would like to stay in your home for as long as possible. But is your home well suited to the task? Modifications may be necessary to accommodate aging in place and to avoid falling, especially in the bathroom. Other home modifications may include entry way ramps and wider doorways to accommodate wheelchairs or walkers, handrails, and roll-in shower stalls. For multi-level homes, remodeling may be necessary so that there is a bedroom and a bathroom on the first floor. Another consideration is private space for a caregiver who may need to live with you.
While everyone hopes to live a long, healthy, independent life, the reality is that you may need to rely on others for care in your later years and for many years. How you pay for that care is worthy of careful consideration long before you need it.
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Information provided in written articles are for informational purposes only and should not be considered investment advice. There is a risk of loss from investments in securities, including the risk of loss of principal. The information contained herein reflects Sand Hill Global Advisors' (“SHGA”) views as of the date of publication. Such views are subject to change at any time without notice due to changes in market or economic conditions and may not necessarily come to pass. SHGA does not provide tax or legal advice. To the extent that any material herein concerns tax or legal matters, such information is not intended to be solely relied upon nor used for the purpose of making tax and/or legal decisions without first seeking independent advice from a tax and/or legal professional. SHGA has obtained the information provided herein from various third party sources believed to be reliable but such information is not guaranteed. Certain links in this site connect to other websites maintained by third parties over whom SHGA has no control. SHGA makes no representations as to the accuracy or any other aspect of information contained in other Web Sites. Any forward looking statements or forecasts are based on assumptions and actual results are expected to vary from any such statements or forecasts. No reliance should be placed on any such statements or forecasts when making any investment decision. SHGA is not responsible for the consequences of any decisions or actions taken as a result of information provided in this presentation and does not warrant or guarantee the accuracy or completeness of this information. No part of this material may be (i) copied, photocopied, or duplicated in any form, by any means, or (ii) redistributed without the prior written consent of SHGA.
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