Should You Insure or Self Insure for Long Term Care?
Should you insure or self-insure for long-term care? Since November is Long-Term Care Awareness Month, let’s tackle this question.
Recently, the issue of Long Term Care hit close to home when my father was diagnosed with dementia. Thankfully, my Dad has a plan in place and a solid support system that includes myself, my sister, and my mom. But not everyone is so lucky. Whether it’s distance from relatives or just not coming from a large family, many people don’t have a plan in place if they get sick. If you don’t have a family to help you during a health crisis – what would you do?
To insure or self-insure for Long Term Care? That is the question
This is a question a lot of people ask. And it really depends on where you’d like your money to go. What that means is: do you want your money to go to family or a cause close to your heart? Or do you want it to potentially be drained away by the cost of your long-term care? Here are some interesting stats:
“According to Lewis Mandell, Economist, Award-winning Educator and Author*, if you have between $150,000 to $700,000 in assets, you need long-term care insurance. Below $150,000, you will likely qualify to receive state Medicaid benefits after spending down all your assets. Above $700,000 you can use your assets to self-insure.”
Meaning you’ll be spending money that comes out of your own pocket rather than that money going to the people or things you love. (These stats were based on the cost of care from six years ago, it’s likely even higher now.)
How much does long-term care cost?
The annual cost of care across the nation according to Genworth 2019 Cost of Care Survey is from $48,612 for assisted living to $102,200 for private room in a nursing facility. ( 2023 costs: $57,289 for Assisted Living ,115,007 for private room)
Many people I’ve talked to with a high net worth still insure because they want to preserve their assets for their heirs. They use insurance money to pay for long-term care costs.
But Long Term Care insurance companies have potentially high rates, especially if you didn’t have the opportunity to buy into a policy at a young age.
Did you know: You can use a Living Benefit feature for Long Term Coverage?
Many of my existing clients are surprised to learn that their term life insurance policy has critical, terminal and chronic illness benefits. This means if they get a chronic illness requiring assistance or supervision due to poor memory they can file a claim on their term policy and get paid while alive. It’s a myth that these kinds of benefits are only available on a permanent policy.
In fact, one of our clients, a 62-year-old male was diagnosed with dementia a few years after he started his term policy. Because of the payout he received from his policy, his wife was able to hire a caregiver to stay with him while she went to work. And most importantly their savings was not drained away by his long-term care needs.
What to do during Long-Term Care Awareness Month
November gives us the opportunity to be grateful for what we have and plan for our future. Long-term care is an important planning consideration and should not be left to chance. Long-term care does not have to break the bank both now and when you need it.
I’m happy to educate you on the different options available and help you find a solution that suits your needs. Schedule a free consultation.
*Author of What to Do When I Get Stupid: A Radically Safe Approach to a Difficult Era, 2013.
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Sheilla Vidal is a Retirement Income Certified Professional RICP® and life insurance broker. Sheilla is also a physical therapist, wife, mother of two, and one of the caregivers for her 85-year-old father. She is an avid learner. She writes, speaks, and recognizes that her work in helping clients live with dignity is her God-given mission.
