People generally understand the need for life insurance. Nobody wants to leave their family without support or to burden their loved ones with their final expenses. But what about long-term care insurance? For some reason, many people feel reluctant to think about the likelihood of needing a long-term care facility someday, even though the costs of such care could easily devastate their family.
What’s the worst-case scenario?
Some years ago, a man named Norman* declined to invest in the long-term care insurance that his agent recommended. Then his wife got cancer and spent her final 18 months in a nursing facility before she passed away. Her husband barely escaped bankruptcy. “It tears you up,” said Derek R. Schuett, a Senior Solutions Representative with First Mid Insurance Group. “To hear someone say, ‘I wish I had done what we talked about, and spent the one or two thousand a year.’ Now everything is gone.”
Cases like Norman’s are why Derek advises his clients to add a long-term care rider onto a universal life policy. “I’d hear clients want to skip the long-term care insurance, because their thought was they might die without ever having used it. But by making it a rider on their life insurance policy, they would get their money’s worth either way. They understand that if they pass away without ever needing to use their long-term care insurance, they’re leaving that money to their spouse or other heirs.
Matthew J. Barnes, a designated Long-Term Care Professional and Senior Solutions Representative with First Mid, also sees a hesitancy among some clients to purchase long-term care policies.
“I’ve spoken with many families through my nearly 25-year career. A common concern they have is what if they buy long-term care insurance and then never use it. The life insurance/long-term care insurance combination eases those concerns and may satisfy more than the one objective of paying for extended care,” Barnes said.
If people are watching the effects of traditional long-term care insurance premiums or having a personal experience with those increases now with a family member, the Life/LTCI combination can alleviate their objections to purchasing and worrying about not being able to afford the lifetime premiums in their retirement years.
Medicare and health insurance typically don’t cover long-term care, and without a long-term care policy in place, there’s a danger of not being able to afford care, of running down the health of your spouse or other family caregiver, or of spending all your assets and would-be retirement on the cost of care until you ultimately end up in a substandard facility. Medicare covers only 100 days and only in specific cases, while Medicaid will not kick in until your assets are spent down. You may not prefer the facility Medicaid will cover.
Still not convinced that you need to do some long-term planning?
Here are some real-life scenarios* from the experiences of Barnes, Schuett, and Mike Hurm, a fellow Senior Solutions Representative with First Mid:
Tom and Sara, 30-somethings
Tom and Sara started thinking about life insurance and long-term care early, and as a result have a very affordable premium. In their case, they each have a $250,000 death benefit, and a long-term care policy that will pay up to $10,000 a month for 25 months. For Tom and Sara, purchasing their policy while young and healthy means affordable coverage.
Janice and Henry, early 60s
Janice and Henry were nearing retirement and had whole life insurance, but no long-term care insurance. They each had a $50,000 life insurance policy with around $30,000 cash value. Mike moved some of this coverage to a universal life insurance policy with a long-term care rider. Now, they each have a nearly $100,000 death benefit and a long-term care policy that would pay about $4,000 a month for 25 months. The best part? Their premiums actually went down!
Andre, late 40s
Andre had several different life insurance policies, including one his parents purchased when he was a small child. It’s usually a good idea to consolidate, but Andre hadn’t worked with an astute agent until he started working with First Mid. Andre had more life insurance than he really needed. Derek consolidated all Andre’s policies, thus increasing his death benefits and adding the long-term care insurance. Said Derek, “His premium ended up being exactly the same. We didn’t save him anything on his premium, but he got long-term care without any more money coming out of his pocket.”
But why do you need long-term care insurance?
Why is having long-term care insurance vital? Here are a few facts**:
- 6.3 million: The number of Americans who have a high long-term care need because they need help with two or more activities of daily living or are experiencing cognitive decline.
- 15 million: The number of Americans expected to have a high long-term care need by 2050.
- 52.3%: The expected percentage of people turning 65 who will have a long-term care need during their lifetimes.
- 38%: Percentage of Americans over age 85 who have Alzheimer’s dementia.
- 2 years: Average number of years that individuals age 65 and older will have a high long-term care need during their lifetimes.
- 0.88 years: Average duration of nursing home stay for men.
- 1.44 years: Average duration of nursing home stay for women.
- $82,125: Median annual nursing home cost, semiprivate room, 2016.
Is there a low-cost option?
Options do exist for people without a lot of money or assets. A short-term policy is a possibility. If someone can only afford a smaller policy, that policy can at least prevent a catastrophe. If your healthcare bill is $72,000 and you’ve got insurance that pays for $36,000, that’s still some protection.
My kids will take care of me!
“Are you sure you want your kids changing your diapers and having to take care of you?” Derek asks. “It’s a good idea to get adult children into this conversation. You hear kids saying they’ll want to care for their parents and never put them into a home. We’ve seen it where kids want to care for them, but it becomes too much.” If your children need to work, they may not be able to take off as much time as is needed to take care of you, and they may not be able to afford to quit to care for you. So even if you can only manage a smaller policy, it may be enough to hire an aide to come in a couple of times a week to help out with in-home care.
How do you know what you need?
There is no standard amount of coverage recommended. Every policy needs to be personalized to fit the client’s individualized situation, and that means a sensitive and personal discussion about your assets, needs, and financial goals.
How can I get started?
You can email or call Derek Schuett (dschuett@firstmid.com • 618-476-3451), Mike Hurm (mhurm@firstmid.com • 217-684-2277), Matthew Barnes (mbarnes@firstmid.com • 800-373-7505) or, contact us online!
Insurance services are not deposits or obligations of the bank, are not insured by the FDIC or any governmental agency, and are not guaranteed.
*Names and some details changed to preserve anonymity.
**Source: https://www.morningstar.com/articles/823957/75-mustknow-statistics-about-longterm-care.html
