Long Term Care Insurance
Look at the following statistics, which might convince you at least to consider obtaining some kind of long-term care insurance (LTCI).
- On average, 69% of people age 65 or older will need some form of long-term care.
- The national average cost of a private nursing home room in 2018 was $275 daily or $100,000 annually.
- However, in some states the cost is higher: Alaska, $351,000; Massachusetts, $153,000; Connecticut, $165,000; New York, $146,000 ($215K in Manhattan); Oregon, $120,000; Colorado, $108,000 (while in Texas, a mere $78,000!). (Source: seniorliving.org)
- In year 2018, the national average annual cost was $48,000 for assisted living , and $80,000 for in-home care.
- Of Americans who are 65 years old and older, only about 15% have long-term care insurance.
- Unpaid family members and friends provide 83 percent of all long-term care in the U.S.
Do you have LTCI?
Based on the statistics, the answer for most is NO.
Should you have LTCI?
Based on the statistics, the answer is YES! If the average cost of a nursing home stay is $100,000 a year, how many years do you have to stay in that home before spending down a good percentage, if not all, of your wealth?
Why don’t people purchase LTCI?
There are really two reasons people do not buy LTCI. 1) Cost — it can be expensive. 2) Denial — many people have the “it won’t happen to me” attitude when it comes to LTC.
The sad truth is that people who do buy LTCI are often those who have had a loved one or friend feel the devastating effects of LTC costs without having LTCI.
What does LTCI cover?
It depends on the policy purchased. Some cover only nursing home care, while others cover in-home care as well as a number of other expenses. The coverage will have a limit (usually a daily or monthly limit) over a set period of years, or a lifetime total.
What triggers LTCI coverage to kick in?
Typically, it’s when you cannot perform “2 of 6 ADLs” without help. ADL stands for activities of daily living: Bathing, Dressing, Toileting, Transferring, Continence, and Eating .
There are several different ways to obtain LTCI coverage. Depending on your situation, one may be better for you than another.
This is the most comprehensive, but also the most expensive type of LTCI. You pay an annual premium of $2,500-$10,000+ a year (depending on your age); and if you incur LTC expenses, the policy will pay up to its daily limit. Traditional LTCI is like term life insurance. If you don’t use it, you do not get the premiums back.
Single Premium Life Insurance policies that have LTC benefit. Most people are not aware that they can purchase a life insurance policy that has an LTC benefit. Why would you purchase this type of policy? Because if you ever need the money you paid in premiums, it is accessible. That’s right. If you paid a $200,000 one-time premium for a policy and needed the money in years two, three, or whenever, you could ask the insurance company for a refund of your entire premium.
Additionally, some policies grow money in the policy similar to money market/certificate of deposits. This type of policy is a good fit for an older client who has money sitting in CDs and money market accounts because they think they may need the money some day and, therefore, do not want to allocate it to buying traditional LTCI.
To view/listen to a video presentation on SPL policies, please click on the picture below.
Retirement Life™ (RL). As you can read by clicking here, growing wealth through the use of RL can be a terrific idea for many. A nice by-product of using a RL product is that the policy comes with a FREE LTCI rider. Essentially, if you cannot perform two of six ADLs, the insurance company will give you a percentage of your death benefit early (tax-free). This type of coverage is not as good as a traditional LTCI policy; but if you are buying a policy to build wealth, why not buy one with a FREE LTCI benefit?
Deducting the cost for LTCI
Most people do not know how to write off traditional LTCI premiums. While not everyone can do so, some can. If you would like to learn how to obtain a 100% deduction for LTCI premiums, please click here.