Thinking about Buying Long-Term Care Insurance? Read this first.

confusion-005by Tobe Gerard, CLTC, MBA, MLS, LIA

There are many questions posed by prospective clients when they are first considering long-term care insurance (LTCi), but most begin with the disciplined questioning of the Socratic method: Who? What? When? Where? Why? How?

Who is buying? Couples and single women.

What are they buying? 50% of our clients buy traditional LTCi and 50% buy a hybrid policy that combines LTCi with life insurance. That is a huge shift from just five years ago when traditional LTCi made up 90% of our sales.
>Traditional LTCi Policies Current policies are less robust than years ago, typically they provide $4,500/month or $6,000/month, 3 or 4 year benefit period, 3% compound inflation. Couples almost always purchase the “shared” rider.
> Hybrid LTCi Policies Clients most often re-position $100,000 to fund a policy. The benefits range from $4,500 to over $6,000/month depending upon age, gender, and dollars contributed to fund the policy. The sweet spot appears to be policies that have a six year benefit period and 3% compound inflation.

When are they buying? Most people purchase LTCi in their fifties, but our clients range from 46 to 71.

Where are they buying? The states that have the most “insured lives” are CA, TX, NY, FL, IL, PA, OH, VA, NJ, WA, and MN.

Why are they buying? These are the top six reasons people purchase a LTCi policy.
#1 A desire to protect assets.
#2 A desire not to be a burden to family and other loved ones.
#3 A desire to have choices on where to receive care.
#4 A desire not to rely upon the government for their care.
#5 They have experienced using LTCi for a relative (parent, grandparent, spouse) and saw what a gift LTCi was to the family.
#6 They have experienced caring for a relative without LTCi and they saw how it drained the family’s resources financially and emotionally.

How are they buying? Many clients have been referred to us by their financial advisor, their attorney, or their accountant, although some people purchase policies through their employer; some buy through affinity groups such as college alumni associations or professional associations that offer members a discount; and others search online and buy a policy remotely from an insurance agent who sells by phone in multiple states.

Editor’s Note: For decades, the author has provided families with guidance about selecting long-term care insurance policies as well as how and when to trigger a claim. To help you become a more savvy consumer, we’ve asked Tobe to become an ongoing contributor to our blog.

Reprinted with permission from Tobe Gerard.

c 2016 Circle of Life Partners, LLC. All rights reserved.

Know Your Money: The True Cost of Long Term Care

Calculating the Cost of Care

Calculating the Cost of Care

by Janet Simpson Benvenuti

Recently I asked our financial advisor to do some retirement planning and estimate expenditures through the end of my life. To my surprise, my husband and I both are going to die at age 87 (for the record, I will predecease him), spending $100k/year in today’s dollars for each of the last three years of life. Amused, I wondered where I would find care for $100k in Massachusetts. The last assisted living facility with a memory unit I visited cost $8700/month without hairdressing or a personal care attendant. I’m sure to need both. And only three years of care? Prudently, one would plan for at least six, and with any history of longevity or cognitive impairment, I would plan for 12.

That same day, I spoke with a different financial advisor whose 91 year old client has Alzheimer’s disease. He and his spouse reside in Connecticut and spend a more typical $15,000 a month for assisted living with an aide for additional support, $180,000/year. When I reminded that advisor that home care for someone with Alzheimer’s disease is tax deductible as a medical expense, she expressed surprise, unaware of IRS Publication 502.

What’s going on here? Why are financial advisors so ill-informed about the true cost of care?

Quite simply, few people, including financial professionals, understand the extraordinary cost of long-term care and the options available to manage expenditures wisely in the last decade of life.  Effective financial planning requires more than just the skills to create an investment portfolio or project future expenses, but integrated knowledge about finance, elder law, insurance, health care and inexpensive community resources for aging in place. It’s why I founded Circle of Life Partners.

I’ve been guiding families through the aging journey for years, yet I still find the numbers shocking. Recently, I received a call from a family of three adult children who were growing concerned about their mother’s ability to care for their father safely at home. He was three years past his initial diagnosis of Alzheimer’s disease and the family felt he might be best served by moving into an assisted living facility with a memory unit although he did not have long-term care insurance. I calculated the price tag for nine years in a highly-regarded memory unit and subsequent skilled nursing care, $835,000- $1.25 million. Using an adult day health program or a part-time companion suddenly seemed a much more reasonable option.

Last week, I wrote about the Bipartisan Policy Center (BPC) launch of a new initiative on long-term care led by former Senate Majority Leaders Tom Daschle (D-SD) and Bill Frist (R-TN), former Congressional Budget Office Director Alice Rivlin, and former Wisconsin Governor and Secretary of Health and Human Services Tommy Thompson.  BPC’s Long-Term Care Initiative will propose a series of bipartisan policy options in late 2014 to improve the quality and efficacy of publicly and privately financed long-term support services. Read the white paper here to learn more and follow their work @BPC_Bipartisan.

Let’s hope they can get their arms around this issue. Until they do, I’ll continue guiding families to the resources they need, until I need the same support, at age 84.

©2014 Circle of Life Partners, LLC. All rights reserved.