Brooke decided to buy a fancy nightguard sanitizer machine. She also had knee surgery this week. It was 9pm (2am in Child-Rearing Parent Standard Time), so we were both exhausted. She took my nightguard from the sanitizer, looked at me, looked at her knee that could have been mistaken for a giant water balloon, looked at the fifteen feet between us that might as well have been the Grand Canyon, and promptly took the easy way out.
She hurled my slippery, translucent, freshly cleaned mouthpiece across the room.
It ricocheted off my arm, bounced off my lamp, glanced off the wall, and landed squarely in the center of the carpet under our bed.
At that moment, I questioned whether I really needed that nightguard. It had a good run, but perhaps it was time to put it out to the carpeted pasture.
As the fumes of my work ethic kicked in enough to roll off the bed and blindly reach for this mouthpiece, my second droll thought was “imagine how hard this would be if I couldn’t successfully perform two ADLs.”
What are ADLs? Funny you should ask. It stands for Activities of Daily Living, and they include things like getting out of bed, eating, dressing, going to the bathroom…basically the basics. And when you can’t do two of them for a certain period of time, a long term care insurance policy can start paying for your care.
Stretching to reach for my mouthpiece that almost certainly made friends with hair and a rogue dust bunny, I chuckled at the internal joke almost no one would get or find funny except perhaps the wayward insurance agent.
Long term care insurance is a polarizing topic. Experts will tell you it’s a must, right as the other side of equally expert experts tell you it’s not the best way to prepare and you should start early and invest your premiums instead.
We don’t think LTC insurance is mandatory or often even recommended, but we also believe it can be a helpful tool in the right circumstance.
There are some tax benefits to using a policy. Your benefit is usually tax free (with a few exceptions), whereas paying for care out of pocket usually means paying taxes on IRA money or realizing capital gains from selling assets.
There are also downsides, like paying a lot of money in premiums for something you may never use, like so many other types of insurance. Some say those policies eat away at your legacy. Others retort that it can preserve your legacy by keeping a nursing home from gobbling up your assets.
They both have merit. And the answer of whether you need a policy isn’t driven by net worth necessarily either. People with relatively modest means sometimes buy a policy because some policies ensure the state doesn’t go after all of your assets in the event you run out of money, apply for Medicaid, and the state agrees to pay for your care. A policy here could help preserve a small legacy.
Others figure the cost of the premiums would impose too much on their budget for something that may never happen, or for too brief a time to be worth insuring against.
If you want to know if long term care insurance does or does not make sense for you, call us. We can help answer that question for you and your particular circumstance and goals.
Rather than telling you point blank that it does or doesn’t make sense, I want to focus on some general tips and tidbits.
Ways to keep LTC insurance costs down.
Increase the elimination period: These kinds of policies have something called an elimination period. Usually it is 30 or 60 days of waiting before your policy starts to pay out, even if you meet all the criteria and are paying for care. If you are trying to save money, increasing the elimination period to 90 or 180 days can reduce your premiums while still protecting you from the scenario most people fear: the chance of an extended need for care. Reasonably well off people can afford to pay for a few months of care, though it may be expensive.
Be smart with coverage: You can also opt for different levels of coverage for different kinds of care to save some money. For example, think about someone who needs a nursing home. They are probably paying way more than someone who decides to stay at home and receive some home health care services instead. It probably doesn’t make sense to be equally insured for both situations. Instead, consider a policy that pays 50% of the nursing home coverage for home health care. It should help reduce the premiums.
Reduce daily benefits: Reducing the amount you can receive per day is also a way to cut the premium. The policy may cover, say, $150/day. If care is $180/day, $30 is the short fall—likely a much more manageable bill than no coverage, but also a lower premium than if you opted for a higher daily benefit.
Don’t wait too long: If you are dead set on getting a policy because mom was in a nursing home for ten years and you don’t want to get caught with your pants down without someone to pick them up for you, get going! If you do it while you are healthy, much like life insurance, you will pay less if you don’t have negative factors that might cause the insurance company to charge you more. Again, I am not saying you need to get a policy–but if you know you are, do it before you have some sort of health issue that renders a policy much more expensive (or worse, makes you uninsurable!).
Consider a joint policy: Sometimes a joint policy (or a shared pool policy, it might be called) can reduce the cost for a policy but still ensure access to benefits more economically than if you had two separate policies. Some insurance companies also offer discounts if both spouses apply for a policy at the same time.
You can also mandate your children take care of you as restitution for all the diapers you changed for them growing up! Done properly, you can reduce your cost to zero!
Just kidding; don’t do that. Unless your kids are okay with it, blindsiding them with the expectation of care is not a good idea. Relationships aside, they may not live near you or have the bandwidth to help at that point.
Some people I meet announce their plan is to run off into the forest and disappear one day. They seem to be tongue in cheek when they say it, almost like they are hiding behind humor to avoid confronting their mortality. Regardless, I politely suggest coming up with a different plan. Your family probably isn’t on board with that plan, and should you be unable to get around, they are fairly unlikely to serve as accomplices in your “escape”.
The last thing I recommend: take care of yourself! The healthier you are, the less likely you will need care and the less likely you will need extended care. Eating well, exercising, getting plenty of water and sleep, and taking medication your doctor tells you to all can indirectly reduce the cost of both a policy and care in the event you need it.
Again, reach out to us if you have questions. For some clients, we tell them not to get a policy. For others, we can show them options, pros, and cons. As fiduciaries, we are held to a higher legal standard of care than many traditional insurance agents and are required by law to put aside conflicts of interest when making recommendations during the financial planning process. We can help you understand how best to prepare for the possibility of needing care in the context of your overall financial plan. Regardless of whether you need a policy or not, extended care is one of the single biggest things that can derail an otherwise solid financial plan.
As I fumbled around for my mouthpiece in the dark, it wasn’t lost on me that many older people are afraid to get on the ground because they struggle to get back up. Planning for a helping hand with things during our final chapters that barely take a thought now can dramatically affect quality of life. Care doesn't have to be advanced memory care for everyone—it can take all shapes and sizes. But having a way to afford help is something we should all plan for.
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