Who Needs Long-Term Care Coverage and Why?
Did you know…“fewer than 1 in 30 Americans own a long-term care (LTC) insurance policy, and only about 7 percent of adults over 50 own such a policy. The raw figure of 7.5 million insured has barely budged since 2008, despite an increasing aging population.” (Source: https://prospect.org/familycare/the-collapse-of-long-term-care-insurance/)
Question: Who Doesn’t Need or Who Shouldn’t Get Long-Term Care Coverage?
Answer: Not everyone needs long-term care coverage, therefore there are people who shouldn’t put their money towards a premium for a long-term care policy. But, who might these people be and are you one of them?
- Medicaid Recipient: Are you on Medicaid or could you qualify for Medicaid? If that’s you, then you don’t need a long-term care policy and you couldn’t afford it anyway…
- High Net Worth: Do you have a liquid net worth of $3 million dollars or more?
When we say liquid we mean assets found in bank accounts and investment accounts. We do not mean things like artwork, automobiles and real estate. There are lots of people who have a high net worth, but its in the land that they own. They are land rich and cash poor as they say. I have clients who are scraping by, but are sitting on hundreds of thousands of dollars worth of land.
**Having a high net worth does not mean that you shouldn’t consider purchasing Long-Term Care insurance. Turns out that the higher your income and net worth, the more likely you are to purchase Long-Term Care insurance. The hybrid Life and LTC policies are the way to go for the high net worth individual or couple.
Question: What Options Do You Have If You End Up With A Long-Term Care Situation?
Answer: You can—
- Hope and Pray: That you are part of the 30% that won’t end up needing some form of long-term care services. That’s not all positive. You may end up dying prematurely due to an accident or sudden disease.
- Self-Fund It: You are part of the fortunate 5% of Medicare beneficiaries with a net worth of $1 million dollars plus. And while a significant long-term care need will put a serious dent into your net worth and what you can pass on to your family, you should be able to cover your costs. But, what if you derive a good bit of your income from your assets and you eat up those assets…how will you or worse yet, your surviving spouse live off of a much lower income? Also, be sure to ask yourself this question: If you had to pay for care TOMORROW, what assets would you liquidate first?
- Rely On Medicaid: You are part of the unfortunate 20% who can qualify for Medicaid assistance. Hopefully, Medicaid will take good care of you.
- Rely On Your Children: I’m all in favor of adult children taking care of their elderly parents. It should be done more. That was the way it was done for thousands of years and is still done that way in many cultures. Unfortunately, most adult children in America have no real interest in caring for their aging parents. And often times the ones who are interested are not equipped mentally, emotionally or financially to do so. But, I must add this in—It would be wise to have a discussion sooner rather than later with your adult children about how you will be cared for later in life and how that care will be funded. It may be in your children’s best interest for them to purchase a Long-Term Care policy for you.
- Use The Long-Term Care Insurance You Purchased: You were one of the wise ones and purchased a Long-Term Care policy (when you were healthy) and now you are glad you did! You realized that none of the other options were truly viable and you purchased at least some Long-Term Care Insurance?
Question: In The End, Who Should Seriously Consider Obtaining Long-Term Care Insurance?
Answer: The 75% of retirees and Medicare beneficiaries who either aren’t affluent enough to self-fund their long-term care needs or who are not destitute enough to qualify for Medicaid assistance.
The Positive and Negative Reasons Why You Should Purchase Some Long-Term Care Insurance
Why exactly would you want Long-Term Care coverage? Think about that for a moment…
The Negative Reasons Why…
- Based upon the statistics I’ve already quoted, there’s a reasonable chance you or a spouse will have a long-term care need.
- Also based on the statistics already mentioned, odds are, you won’t have the liquid assets later to cover some or all of those costs.
- You will not be poor enough to qualify for Medicaid.
- Your children may not be mentally, emotionally and financially prepared to deal with physically caring for an elderly parent. It can become a full-time job. Trust me, I know.
The Positive Reasons Why…
- To take control of your care. And, to be properly cared for in the event you have a long-term care need.
- To preserve and protect as much of your assets and income as possible. If you can be cared for in your home, then you should protect that asset so that you don’t have to sell your home to fund your long-term care needs. Yes, you may be able to get a reverse mortgage to fund your long-term care costs…but what if it’s not enough or you use it all up…then what?
- To protect your family (spouse and children) from the unnecessary financial, mental, emotional and physical burdens and hardships. Just because you have a life altering event, doesn’t mean your spouse and children have to have one!
What Does Long-Term Care Planning Do For You and Your Family?
- Helps protect your hard-earned savings
- Gives you more control over decisions
affecting you and the freedom to choose your
care preferences - Provides your loved ones resources and support to manage care
- Helps you feel more confident about the future
- Ensures your assets are passed to your loved ones
We have heard it a million times – “by failing to prepare, you are preparing to fail” or some variation of this statement.
The Purpose Of Insurance
It’s All About Risk Management! Understand—insurance, regardless of the type (Medicare, Long-Term Care, Life, Annuities, Disability, Auto, Home) is purchased and owned to mitigate risk—so that:
- In the event a peril occurs…you are covered financially or physically.
- You don’t have to liquidate your savings and investments to cover a financial or physical need that has occurred.
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