How Will You Pay for Long-Term Care? By Nikki Nee 07/06/2021 Chances are, you’ve heard about long-term care insurance, but have you asked yourself if you need it? It is worth asking the question, because 70% of people over the age of 65 require long-term care to some extent.1 When the time comes, people are hesitant to use their assets to pay for professional care, so the responsibility lies with their spouse or other family members to care for them. However, if someone has long-term care insurance, the coverage has been purchased specifically to use for the purpose of professional care. So, when should you consider applying for coverage? As you age, the probability of being declined increases due to health issues. Forty-four percent of individuals between the ages of 70-74 are declined for coverage, and the percentage increases to 51.5% over the age of 75.2 The other factor is having the cash flow to afford coverage. During your 30’s and 40’s, cash flow is often tied up in paying down debt, saving for retirement, and paying for children’s expenses. Your 50’s and 60’s are often your highest earning years, and it is likely your children are no longer on the payroll. While there isn’t a “one-size fits all” answer to this question, mid to late career often works well because you still have many good options, AND you’re able to afford it. What are the types of policies for long-term care insurance? The most well-known type is the traditional policy that pays a daily or monthly benefit for a fixed or unlimited amount of time, depending on the policy, when care is needed. This policy has the lowest cost of entry and the highest flexibility in specifications within the policy. But there is no return of premium, and the premiums can be very costly. The other policy option is the hybrid or asset-based policy, which is relatively new. This option combines life insurance with long-term care insurance. Premiums can be paid in one lump sum or in level payments over 5, 10, or 20 years. This policy type provides a death benefit if you do not use the coverage for long-term care expenses but requires more money upfront. Another option is to self-insure for any long-term care you may need. But as I mentioned earlier, many people hesitate to use their assets to pay for the proper care. Understanding how a long-term care event can affect your financial plan and the costs associated with such an event is a great conversation to have with your financial advisor. They can help you determine whether a long-term care policy could be beneficial. As with any insurance policy, you hope you don’t have to use it but are thankful you have it when the time comes! 1 https://www.morningstar.com/articles/1013929/100-must-know-statistics-about-long-term-care-pandemic-edition 2 https://www.aaltci.org/news/long-term-care-insurance-association-news/2019-long-term-care-insurance-applicant-decline-rates-reported-by-association Please Note Foster Group does not serve as an attorney, accountant, or insurance agent. Foster Group does not prepare estate planning documents or tax returns, nor does it sell insurance products: PLEASE SEE ADDITIONAL IMPORTANT DISCLOSURE INFORMATION at www.fostergrp.com/disclosures. You Might Also Like Webinar: ThanksGIVING Jason Brown What You Need to Know About Public Service Loan Forgiveness Kadin White Game Saving Plays for 2021 Financial Planning Ross Polking Thanks a Million Ethan Gascho PLEASE SEE IMPORTANT DISCLOSURE INFORMATION at www.fostergrp.com/disclosures. A copy of our written disclosure Brochure as set forth on Part 2A of Form ADV is available at www.adviserinfo.sec.gov. BACK TO TOP Return to Results Share on facebook linkedin twitter email Want more? Ask us a question. Foster Group | West Des Moines, IA| Omaha, NE Phone: 515-226-9000 | Toll Free: 800-798-1012 | Fax: 515-224-4970 © 2020 Foster Group, Inc. All Rights Reserved | Disclosures | Legal