What if I never use it?

I’m hoping that I will never have to use my long-term care insurance. I know the odds are not in my favor and that 70% of us will experience a long-term care event, so not using my long-term care insurance is not likely. Still…

I also hope I never have to use my home owners, auto or health insurance. You won’t hear me complain about paying premiums and not using my coverage.  Nevertheless, some clients do express this concern. They indicate that they will use their savings rather than “risk” paying a premium for something they never use.

The challenge is for this to work

Is Long-Term Care Insurance Expensive?

I am one of the lucky ones. I bought long-term care insurance at age 48.  I purchased a robust policy with a 5% inflation guard from a top-rated carrier. My policy will allow me to receive long-term care at home; it will even pay for informal caregiving services provide by a friend or neighbor and for homemaker services such as laundry, housekeeping and meal preparation. It will pay for my room and board and long-term care services at a beautiful assisted living facility or if need be a private room in a deluxe skilled nursing facility.

I am also known as the frugal one in my circle. I am always looking for a better, less expensive way to get the results I need.

Women are in Double Trouble

Long-term care is assistance provided when we can no longer live independently. The need for long-term care may be the result of aging, illness, accident or cognitive impairment such as Alzheimer’s.  

At age 65 there is a 70% chance that at some point in our lives we will need long-term care. At age 85 there is a 50% chance that we will have Alzheimer’s disease.

For women this is double trouble.  Women not only provide but also receive the majority of long-term care services.

About three-fourths of family caregivers are women. Women have longer life expectancies than men outliving them by an average of five years.  Women are more likely to be single as they age. Half of women over age 75 live alone. When their husbands or partners need long-term care, wives often provide the required hands-on care. These women worry about what will be left of them physically and financially after caregiving. When their partner dies, they must live alone as they continue to age and then need care for themselves. 

Life Insurance. Disability Insurance. Long-Term Care Insurance. Which Comes First?

November is Long Term Care Awareness Month. This is the ideal time to get more information on a topic that has the potential to significantly impact you and your loved ones. Most of us think about long-term care as an issue for the elderly and that we can wait to develop a strategy for care until sometime in the future. But this is not true.  Statistics show that 41% of people currently receiving LTC are adults 18 to 64 years old.

In the event we can no longer work we recognize the need to purchase disability insurance to replace some of our lost income. Replacing 66% of lost income is typical.  Meaning if one earns $75,000 a year than he/she may receive up to $49,500 a year, for some number of years, in disability benefits. We tend to postpone purchasing long-term care insurance until our fifties, sixties or beyond. Yet the cost of long-term care and the impact of needing long-term care may far exceed the costs of lost income due to disability.

The national average today for a private room in a nursing home is  $77,745 annually. Home care may be significantly more expensive.  In addition when waiting until our fifties, sixties or beyond to put long-term care coverage in place we pay more for long-term care
insurance. Premiums rise for new policy holders at every birthday. And increasing costs of care require purchasing more insurance to obtain an equal amount of coverage. And at a younger age it becomes more likely to lock-in preferred health discounts.

A legitimate dilemma for working age adults is

Denial is Powerful, but it doesn’t Pay the Bills* Letting the Cat out of the Bag

“Medicare will pay for heroic care for women who are dying of old age, not a disease that could be treated: diagnostic tests, all manner of surgery. Expensive medications. Trips to the emergency room or hospital.  Yet Medicare, except in rare cases does not pay for long-term care in a supervised, safe place or for home aides to help with shopping, transportation, bathing and using the toilet.” These remarks are the opinion of Jane Gross, former New York Times reporter, and appeared in “How Medicare Fails the Elderly,” Sunday October 16, 2011 New York Times.

Ms. Gross goes on to refer to the “dirty little secret” of health care in America for the elderly.

Four Women and Cocktails

Last week I had an amazing experience.  I was invited to a cocktail party attended by five women including me. At 88 the youngest of the other four had three decades on me. The oldest, at 94, had almost four. These four women alternate their weekly Sunday cocktail
hour at each of their apartment homes. No one has to drive. They live down the hall and a floor away from each other. They all reside in the independent living section of a continuing care retirement community (CCRC).

I’m not sure quite what I expected at Sunday cocktails, but I didn’t expect it to feel the
same as when my girlfriends and I get together for happy hour. I was wrong.

Frying the Biggest Fish

Most of us are worried about the United States and world economy and what it will do to our savings and retirement plans. We are worried about losing yet another 20%, possibly more, if the stock market continues to decline.

Yet clients may spend 100% of their assets for long-term care regardless of what the market does.  Will it be the cost of long-term care that wipes us out rather than how our
investments perform?

Does this mean we are focused on the wrong thing? The U.S. Department of Health and Human Services projects that by age 65, 70% of Americans will experience a long-term care event before they die. And most of us will have to pay for this care on our own dime. In today’s dollars, an average long-term care event can easily exceed $250,000 per person and over $500,000 for a couple. And what happens when this event is truly catastrophic and requires paying for care for 10 or 15 years. Long-term care expense may indeed be the biggest fish to fry and the one that eludes most of us.