Elder Care is emerging as a significant issue for many people as life spans continue to increase. It is nice to know that because of health care advances, we can expect to live longer, but there are no included guarantees on the quality of life in the later years. So the question is, when is the purchase of Long-Term Care Insurance worth it?
Many people eventually face a period in life when they can no longer do for themselves. Daily living tasks such as walking, bathing, cooking, and managing household affairs are beyond their physical and perhaps even mental capabilities. Frequently, that period has not been planned for by the person or family members. And sometimes, this period in life comes suddenly, such as when a debilitating fall takes place.
One thing which people and their families should consider before this difficult period is the purchase of long-term care insurance. This type of insurance provides coverage for the expense of daily living assistance. It can cover in-home assistance as well as assisted living or nursing home costs. Most people, however, buy it to cover in-home living expenses so as to avoid a nursing home.
Often, an elderly person will suffer intermediate health issues before needing permanent assisted daily living. Health insurance and Medicare cover costs of treatment for injuries and illness and typically pay for some daily living assistance as the person recovers or levels off at a permanent degree of recovery. When that recovery occurs, though, those services no longer pay, and the person is on their own.
A long-term care insurance policy will pick up the ball at this point and, depending on its terms, pay for daily living assistance for a period of time or for the life of the policyholder.
This type of insurance can be costly, depending on when it is purchased. The farther away you are from needing its coverage, the more affordable it is. Depending on the person’s age and health, companies may not be willing to sell a policy, or the premiums will be high, reflecting the amount of risk it is assuming. The decision of whether to buy this insurance is a mix of one’s personal financial picture, health, family support network, and family history. For example, a healthy person whose parents lived long into life should be thinking about how he will be cared for in old age. Similarly, a person with no close family to rely on would want a safety net in place. In both of these situations, a proactive person might buy the insurance if she can afford it.
If the cost of the insurance seems beyond a person’s budget, a couple of things can be considered. One is to divert money being saved for retirement to finance the premiums. In a way, the goal is the same—money for retirement years. This approach would require balance between having enough money to fund healthy retirement years and enough to avoid being placed in a nursing home when you need healthcare support.
Another consideration is money being spent on life insurance. Some people carry life insurance early in life to provide for dependents who will survive them, then keep carrying it after that need has passed. The premiums being paid for life insurance could be applied to long-term care insurance, recognizing that the need for insurance still exists, just for a different purpose. A life policy that carries a cash value could be cashed in to pay a lump sum premium for a long-term care policy.
If one buys a long-term policy, caution should be exercised to make sure the coverage pays for what you anticipate needing. Bathing, for example, is one of the first personal activities that an aging person cannot perform; cooking is another. Also, if purchased a number of years before the anticipated need, be sure the policy provides for inflation in the cost of services. And watch out for a waiting period between disability and payments. Policies often include this feature.
The financial impact of living a long life should be a consideration in your estate planning. That’s why we take a holistic approach to estate planning– so we can help you cover all the angles and live life to the fullest. Contact us before buying a long-term care plan so we can support you to review your options objectively. Unlike insurance professionals, we are not paid a commission dependent on the product you buy, and it’s always the best idea to have objective trusted advisor legal counsel, like we provide, to support you and your family.
A Note from the Attorney, Stan Pierchoski:
The practice of law is a second career for me. After obtaining Master of Science degrees in both Nuclear and Mechanical Engineering, I worked in the Nuclear Power Industry for 15 years. Always having an interest in law, I attended and graduated from law school and founded the Pierchoski Law Firm in 2002 in Pulaski, TN. For several years I practiced as a criminal defense, trial attorney. After my parents passed I became interested in Trust and Estate Law and felt a strong calling to change my practice to the Estate Planning area.
For years I have been exclusively doing trust writing and wealth planning and have become proficient at it. Over the last several years my practice has evolved to serve all age groups including elders and Medicaid Planning. I am always open to your questions and am more than happy to chat with you about your concerns so give me a call or stop by my office. You’ll be glad you did!