Who in the world wants to read or talk about long term care? No one. This topic is about as popular as the discussion of a root canal, but like going to the dentist, as painful as it might be, the alternative could be far worse. We all know the statistics; women outlive men. The problem I have seen in the 25 years I’ve been doing financial planning is that a great deal of the family nest egg is spent on the first one who gets ill (statistically the man), trying to keep him alive and when he dies, his widow is left in less than optimal financial shape. So, a lot of us have long term care insurance.
We bought them from solid companies and put them away in some drawer; we shudder to think we’ll ever have to open that drawer. But a lot has changed in the world of long term care and I’m going to suggest you pull out that drawer and re-think the policy you bought. There’s a brand new type of policy out there and I dare say for some, it may be better than what you already have. It’s called “Asset Based Long Term Care.”
The long term care policy, you probably own is like paying for fire insurance on your home. If you end up using it, it was worth paying the premiums. As in fire insurance, you HOPE you never have to collect on that policy. Although most of us are used to the idea that paying insurance premiums sometimes feels like flushing money down the proverbial toilet, we pay our premiums anyway. In either case, we don’t want our house to burn down and we certainly don’t want to end up in a nursing home. But paying premiums for insurance we hope to never collect seems a little wasteful, doesn’t it? Wouldn’t it be nice if we were rewarded at some point for not having our house burn down or not having to go into a nursing home?
Essentially the new type of long term care insurance now available is more of a win-win than the old kind. In the case of premiums paid, either you will use it for long term care insurance OR if you don’t use the long term care benefits, your heirs will likely receive some kind of death benefit. If that isn’t attractive enough, the surrender schedules of seven or eight years are such that you might be able to get your original investment back if your needs change. So one way or another, someone in your family will benefit.
In addition, unlike the policy you probably own, the premiums on asset based long term care policies are usually not guaranteed to go up. The problem we are finding with traditional policies is that insurance companies are raising premiums. They can’t raise them on you, individually, but they can file with the state insurance commissioners to raise premiums on an entire class of people. So essentially, if they can prove their claims activities on men or women age 65 have exceeded their expectations, they can raise that entire class of individuals. And let me tell you, this is happening all over the country. According to an article in the Chicago Sun Times, (March 19, 2012), one insurance company had raised premiums by 90% in just over two years. The sad part of this is once you are living on a fixed income of sorts, you certainly don’t need these types of surprises.
Suffice it to say you may want to re-think how you are paying for Long Term care benefits. Instead of “renting” long term care insurance and waiting for the landlord to potentially increase your rent, you might want to check out asset based long term care. It could be a better deal for you. For further information on asset based long term care, contact us at www.botsfordfinancial.com.
Securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through Lifestyle Planning Solutions, a registered investment advisor. Lifestyle Planning Solutions and The Botsford Group are separate entities from LPL Financial.
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