A short introduction to LONG-term care

November 10, 2017

With the new year upon us, along come the resolutions.

First: to eat healthier (once the last box of chocolates is gone).

Then: to organize the clutter around the house. (Make sure those gift cards find a safe spot and don't get thrown out with the envelope.)

Good. Now, let's start talking future finances.

This month I want to discuss a planning topic that doesn't usually get a lot of attention: long-term care (LTC) insurance. We often hear of the “sandwich generation”—those of us who are taking care of our spouses and children and checking in on our parents as their needs magically appear on our to-do list. But who steps in if something happens to us?

If someone were to ask me, “Hey, Annie, what keeps you up at night?” my answer would be, “People who text while driving”—simple as that. If the driver kills me, my family's needs will be covered by my life insurance. But, if the driver disables me, well, that's another story.

Many people assume, as I did for years, that in the event of a tragic accident that left one disabled, once they were discharged from the hospital, their medical insurance would cover their expenses for LTC, whether it was provided at home or in a facility.

However, this is not the case. Generally speaking, neither Medicare, a Medicare supplemental coverage, nor standard health insurance policies cover LTC. And this is why the financial and emotional toll on families in these situations can become really overwhelming. (A person can get LTC covered by Medicaid once all assets have been depleted, but that is another longer article).

Did you know that “as many as 70 percent of people who are now 65 will need long-term care at some point during their remaining lives. I found this from an article in US News and World Reports, from April 11, 2011 titled 5 Reasons You Need a Long-Term Care Plan It could be because of an illness, injury, or disability, but whatever the cause, these people need help bathing, dressing, eating, going to the bathroom, taking their medicine, and more.

As a financial consultant, I find myself in “advisor mode” during the day, addressing my clients' concerns, and “Momma mode” at night, taking care of my family. My husband works during the day, too, and we don't have family in the area available to help with the care of our two kids, ages 4 and 6. If something happened to one of us, we would need to hire someone. Within the same article, I learned that whether at home or in a nursing facility, long-term care costs have been steadily rising, and can top $100,000 a year for nursing care in an expensive market.

Social Security Disability Insurance (SSI) and group employment disability (usually 60 percent of your income) may partially offset your family's monthly expenses—along with those college, retirement, and vacation funds you have been dutifully saving.

Now that I have your attention (call it a hunch), let's talk strategy. The LTC industry is morphing, with fewer companies issuing policies. However, the provisions are looking better, with cost-of-living adjustments and other benefits becoming the norm. Working with a licensed insurance advisor, you can discuss the best policy—whether a stand-alone, a hybrid with life insurance, or an annuity—to meet your particular needs, covering either just you or you and your spouse.

A hybrid policy is an intriguing option in that, if you ever require LTC, the funds are available; if you don't, the death benefit will be payable to your heirs. Some folks worry that their paid premium will “disappear” if they don't use it; the hybrid strategy is a response to that concern.

There are some really neat ways for families to plan for LTC in the unfortunate event that the need for it arises. Time is of the essence. Like lots of other things in life (wine comes to mind), the premiums for these policies get more expensive with age. BC

Annie Morrison is an independent advisor representative with and securities and advisory services offered through Commonwealth Financial Network, a Registered Investment Advisor, Member FINRA/SIPC. Zuma Financial Advisors is located in Reisterstown, MD. Email her, at annie@zumafinancial.com, or call (443) 468-3280.

The opinions expressed in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.