Options for Long Term Care Insurance
Few people like to think about the possibility of the need for long term care coverage. Most think in terms of “nursing home” insurance, when in fact it is important to be educated on what types of long term care insurances are available, and how they differ in payout dispersal when claims are triggered.
All long term care contracts pay out on not being able to perform certain aspects of daily living. These include but are not limited to needing assistance with eating, dressing & cognitive impairment. A traditional Long Term Care contract is a reimbursement arrangement whereby the carrier will coordinate with the facility and pay them based upon the terms of the contract up to benefit amount that was purchased. The premium for a $7500 monthly benefit with a pool of $540,000 for a 61 yr old male and 55 yr old female couple would be approx. $4200 per year. Insurance carriers pay providers directly as claims are filed, and reimburse only what was spent.
A second approach would be to purchase a product that is identical to the above with one exception. Upon claim, the carrier would pay the chosen monthly benefit directly to client. This provides the unique opportunity to do with these monies what you will, such as providers, bills, food, or to build a ramp up to the house for accessibility, etc. Comparing to the above benefit example, the premium for a $500,000 pool of money for the same 61 yr old male and 55 yr old female couple at $7500 per month, would be approximately $4600 per year.
A third and perhaps the most compelling option would be a single premium product that provides two benefits to the policy holder. For those who are approaching retirement age who have not yet planned for long term care expense, and have monies in CD’s that are earning paltry returns, or perhaps a sum of money dedicated specifically for long term care, a single premium long term care/life insurance product can be an opportunity to leverage these assets. For a 61 yr old male, a $100,000 one time premium payment provides a guaranteed death benefit of $160,000 and a long term care benefit of $480,000. This would provide a monthly benefit of $6682 paying out a total of 6 years. This product has unique flexibility as the client can withdrawal the original single premium payment at any time throughout the life of the contract with no surrender charges. Clients could deposit $100,000, be covered by this two for one policy for a number of years, and then be able to rescind the contract and receive the $100,000 back without penalty.
Any of the above examples prevent the rapid depletion of assets built over the course of a lifetime. The important point is to have this discussion with your financial advisor, accountant, and your own peer group who have already chosen to complete this process. It is also advisable to work with a licensed agent to determine what coverage fits your needs and budget.