Long Term Care Insurance--who needs it?
When I start to talk to people about Long Term Care Insurance (LTCi) the hands frequently fly up in a defensive posture, eyes glaze over, and I'm either told it's too expensive, they don't need it or their kids will take care of them.
Well, here's the tough part. In California in particular, the cost of 'custodial care' can be $70-$90,000 per year. And that's now. What's it going to be in 10, 15, 20 years?
Custodial care is where a skilled type of care like complex dressing changes or intravenous medications are NOT needed. You need help dressing, you can't walk as well as you used to, need help getting to the bathroom,or with bathing or dressing. You don't need a licensed person for these things, therefore, insurance does not cover it. Not even Medicare, despite a popular misconception. And skilled care is covered but with limits.
As for your kids taking care of you, I used to hear this lot when I was a nurse. If you haven't taken '24 hour' care of someone, you don't know how tough it can be. And think about it--If folks are in their late 70s, early 80s, the 'kids' are in their late 50s, early 60s. They may have health issues of their own, they are probably working and their own kids may not be out of the house yet. This is what you have probably heard referred to as the 'sandwich generation.' And honestly, drawing from my nursing background, if things get really bad, do you really want your kids changing your diapers?
You can wipe out your retirement next egg fairly easy once you start needing care. That's when LTCi becomes a good deal.
When should I buy it?
Conventional thinking used to be to buy it in your late 60s, or 70s. The reality is that as you get older, rates go up. And you run the risk of being uninsurable. You need to consider it in your 50s, maybe sooner. At that point you are usually in good health. Being younger the rates are better. And many carriers offer discounts when spouses or partners apply together and for being in good health--so two policies can actually end up costing about 20-40% more than a single policy--quite a hefty discount.
Some people have made the argument for buying it in your 30s--a good idea probably, because you can have a debilitating injury or illness requiring care but at that point you generally have other priorities. Raising kids, buying a house, saving for retirement. So if it fits, or maybe you have access to a group long term care policy which can be considerably less than a private policy, then look at it.
Types of plans
There are 'facility only' plans, but I would advise people to consider a plan that covers care in the three main areas--a nursing home type location, an assisted living facility or home care because you don't know what life will bring. Home care is not necessarily less expensive that facility care. And it isn't always practical. There are also Partnership plans in several states, California being one of them, that provides an 'asset protection' component. Basically, if you exhaust your policy had need to qualify for MediCal there are certain parameters around how much money you can retain. A Partnership plan will allow you to shelter an amount equal to the amount paid out by the policy. There's certainly more to it than that, so give me a call to discuss your situation.
Components that go in to what makes up a Long Term Care policy
There are many other things that need to be evaluated when looking at a plan, so give me a call to talk about your situation.