Long-term care insurance

The Need

Few of us want to think about it, but the reality is that four in ten of us 65 or older will require some type of long-term care during our lifetime.

This raises lots of questions:

• Who will take care of me?
• Who will make decisions about my care?
• How can I make sure I minimize the burden for my family?
• How will I pay for long term care if I need it?
• Should I buy insurance?

While traditional long-term care options are expanding, so are the costs. In California, the average nursing home charges $160 a day or $58,000 per year for care. Costs are projected to double in the next decade. Furthermore, many people over-estimate the role of government in paying for long term care.

The cost of paid care givers is also high. Studies show that unpaid family members and friends provide the bulk of long term care services. An unpaid caregiver may feel a deep resentment for the time and financial commitment they must make to an aging relative or friend.

Buying a Policy

Long-term Care Insurance, (LTCI) helps pay for care when you have difficulty with activities of daily living. Some policies only pay for care when you are in an institutional setting such as a nursing home, while other more comprehensive policies pay for care in a nursing home, assisted living facility, at home, or in community settings like adult day care.

If you are considering buying LTCI, you want to match the policy features with your particular circumstances and choose the best company for those benefits.

Types of policies

In California, policies are labeled according to where the benefits will be paid. For instance, a Home Care Only will only pay for care in your home. A Comprehensive Policy will pay for benefits in a nursing home, Assisted Living Facility, and for home and community care,

"Partnership" policies will allow you to keep more of your assets if you qualify for Medi-Cal later on.

Tax Qualified (TQ) policies allow you to deduct some or all of your premium from federal and state income taxes as a medical expense. Benefits paid under these policies won't be taxed as income. The premiums for Non Tax Qualified (NTQ) policies can't be deducted and there is no guarantee that the benefits will be tax-free. However, these policies exceed the federal requirements for when benefits can be paid, and people may qualify for benefits sooner than they would with a TQ policy.

Benefit Choices

Premiums are based on the choices you make when you buy a policy.

You choose:

1. Which type of policy you want to buy,
2. The amount of daily benefit that will be paid,
3. The number of years you want the policy to pay benefits,
4. The number of days (if any) before the company begins paying benefits after you qualify, and
5. Inflation protection.

These five factors combined with your age, health and the insurance company you choose determine the premium you will pay. If you can purchase insurance with your spouse, most companies offer a discount in premium.

When to buy

If you are 55 or older, its time to consider purchasing long term care insurance You are more apt to medically qualify at a younger age and the premiums are much less expensive –they climb steeply as you age. Even if you pay premiums over many years before possibly needing care, the total cost will likely still be less than a year's nursing home stay.

Buying a policy with Wealth by Design

Barbara Bachelder, CFP is licensed to sell Long Term Care Insurance in California and Nevada. In keeping with our overall commitment to your financial health, we view long term care are an integral part of your financial plan. We tailor our Long Term Care Policy recommendations to what you really need given your financial and family resources. We tailor the policy for your needs rather than push a one size fits all. Because Barbara is licensed will multiple insurance companies, we are not captive to any single product or company.

We only recommend top rated companies. Because we Americans are living longer and more and more people will need long-term care services, we feel it's essential to go with a company which has substantial ability to pay claims and a solid track record of consumer satisfaction.

Barbara Bachelder, CFP® for Wealth by Design, LLC