Trying to picture when, or if, you may need extended care or in home care and what that might entail is a challenge, especially if you are healthy and active now. This type of planning can evoke strong feelings of fear and vulnerability and that is often why we put it off until we “really need to think about it”.
WHEN WILL I NEED IT?
Most often, the payoff of long term care insurance begins when we advance into later years and need health care assistance that our families and loved ones are simply not capable of providing. This comes in the form of an in-home health care worker, an assisted living facility, a nursing home or sometimes hospice care. What we don’t consider, however, is that unexpected accidents can occur in our lives long before any of those scenarios. Without a long term care insurance policy, weathering the expense of a long term rehabilitation center, in home nursing care or physical therapist can have a significant impact on the wealth that you have worked so hard to accumulate for you and your family.
The reality is that we never know when the unexpected might occur and a good long term care policy can protect you and your family from tremendous loss, not only of assets and income, but the emotional and psychological hardship of having to “figure things out” in a time of crisis.
IS THE EXPENSE WORTH IT?
Across the board the cost of long term care is rising. For women, especially those single, widowed or divorced, the costs are rising even more steeply. The reason for this is that women tend to live longer than men and, statistically, women have higher rates of disability and chronic health problems. Another factor in the cost disparity is that women, more often than not, are the caregivers. This means that when their husbands have needed long term care, they may have been the one providing this care. When a woman becomes widowed, there is no one there to care for her.
WHAT IS THE BEST WAY TO PROTECT FOR LONG TERM CARE EXPENSES?
Simply writing a check for your monthly or yearly premium may not offer the most cost effective result from a tax savings standpoint. “While the tax code does allow for the tax deductibility of long-term care insurance premiums, the treatment is very limited. Only premiums up to prescribed IRS limits are allowed, and the premiums (in addition to other medical expenses) must exceed the 7.5%-of-AGI threshold to be deductible at all.” Says Micheal Kitces, Partner and the Director of Research for Pinnacle Advisory Group.
At this time in your life you might be looking to have both life insurance coverage, as well as a policy that could supplement long-term care expenses in future years to protect your assets. There is a newer hybrid Life Insurance policy with Long Term Care rider that helps to accomplish both of these goals for a reasonable price. The policy has a death benefit, and if you need long-term care coverage you can access up to 4% of the death benefit per month until it is depleted. For a policy with a $250,000 death benefit, you could access $10,000 per month for long term care costs. Many individuals like the dual solution because they know their family will get something if the long-term care is not needed or is not used in total. The real drawback with the hybrid policy versus a traditional long-term-care policy is that you lose out on inflation adjustments. The determining factor to make a decision on one of these options is to determine what the goal is. If it is to only protect assets and cover long-term care expenses, you get more leverage with your premiums later in life with a larger pool of money available for care in a traditional LTC policy. If it is to make sure that you have supplemental long-term care coverage, but that if you don’t need it, your family receives a life benefit, a hybrid life insurance policy with LTC rider might better serve you.
WHAT IS THE BENEFIT OF NOW?
With the statistics favoring the likelihood that most of us, at some point in our lives, will need long term care and the records indicating that the cost of that care will rise, it is in every woman’s best interest to consult an unbiased financial advisor on including a long term care policy in their existing financial plan. If you suffer the loss of your spouse and find yourself needing care or experience an unexpected accident, the last thing that you and your family will want to have to consider is how you will pay for the care you will need. Having these types of policies in place enables us all to live happy and productive lives, focusing on the things that matter most to us and enjoying the peace of mind that, should the worst case scenario become a reality, you are able to weather the storm.
For more information on comprehensive financial planning and wealth management and to find out how Northstar Financial Planning can help you define your needs and goals, contact Melinda Davis at email@example.com.