Long-Term Care Insurance

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Are you considering purchasing Long Term Care Insurance? Do you know what it is and why it might be a key component in planning successfully for retirement?

Long Term Care is the type of care a person might need due to an injury, illness, increased frailty or perhaps cognitive impairment. Care might be provided at home or in a facility setting. Some believe that Medicare will cover the cost; that is a myth. Payment sources can be personal income, personal savings, government programs (maybe) or Long Term Care Insurance (LTCI). People make the decision to buy for varied reasons: to maintain independence, to avoid being a burden to family or to protect assets.

Long-term care insurance is valuable for many reasons, but it all comes down to getting help. Have you ever had a relative need care? How was it handled? Did you play a role?

How do you select a facility, how do you prepare for your loved one to return home, where do you get a hospital bed? How do you hire help? How fast can it be done? Am I equipped to lift him/her? What happens if I get hurt? Am I making the right choices for him/her? Is this what he/she wants? How much will this cost?

Recently, I stood outside a patient’s room in the hospital with a discharge planning team firing information at me, telling me what was available and what needed to be done – It was as if I was hearing them in slow motion but everything was happening at warp speed. While the team believed they were offering assistance and surely thought it was helpful, I was struggling to absorb brief snippets, hoping I would remember later.
How do you select a facility, how do you prepare for your loved one to return home, where do you get a hospital bed? How do you hire help? How fast can it be done? Am I equipped to lift him/her? What happens if I get hurt? Am I making the right choices for him/her? Is this what he/she wants? How much will this cost?

Did you know that the average cost of care today in Contra Costa County is $250 per day, if a nursing home stay is approximately 2.5 years, not even accounting for the cost of care received at home prior to entering a facility that translates to $228,125 in today’s dollars. Is that potential expense funded and set aside? How will that impact retirement planning?

One good argument in favor of purchasing LTCI is that it makes good business and financial sense. The premiums are much less expensive than the current annual or even monthly cost of care. Premiums are waived if you are collecting a benefit and the benefit can be received tax free. There are also tax incentives for the self-employed, corporations and individuals (you have to ask your tax professional – I cannot give tax advice). LTCI can be a benefit for selected employees, partners and executives. Some insurance companies offer discounts or simplified qualification requirements if several people, including spouses, from one business apply for coverage. Each participant can personally select benefits that best suit his or her needs. The cost of the policy is determined based on individual health, age, tobacco use, the length of the benefit (2, 3, 5, 6 years) the waiting (deductible) period (90, 120 days) and the daily benefit in terms of dollars per day. There are options for simple or compound inflation protection and there are a number of riders available depending on the carrier.

The care coordination benefits policies provide are invaluable and often underappreciated. There are professionals available to help with all of those daunting challenges. The three times I have been involved with care giving there was no policy in place and the learning curve was fierce. I have first hand experience: It is physically demanding to provide care and also taxing to schedule care and to coordinate treatment. Not to mention the emotional involvement concerning the complex needs of the individual needing the care.

These are real life challenges. Purchasing a policy that can provide piece of mind, pay for care AND help design a treatment plan, make sure it is implemented and updated, makes sense on many levels. LTCI is not a lucky charm, it will not magically eliminate all stress and most likely will not pay for all of the costs associated with the care, but it will help.


— Colleen has over 20 years of experience in the insurance industry. Her practice, based in Lafayette, focuses on individuals and small to mid-sized businesses, providing insurance and employee benefits. She is a current member of the board for the local health underwriters (GGAHU) and a former board member of the local insurance and financial advisors association (NAIFA – Mt. Diablo). www.callahaninsurance.com

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