6 people who dismiss long-term care insurance, but maybe shouldn’t

By Shelly Gigante
Shelly Gigante specializes in personal finance issues. Her work has appeared in a variety of publications and news websites.
Posted on Jun 7, 2019

 

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If you plan to age in place, wish to protect your children’s inheritance, or like the sound of an upscale senior living facility, you may be a candidate for long-term care (LTC) insurance -- and not even know it.

Financial advisors and consultants say long-term care insurance coverage may offer a number of potential perks that all too often get overlooked.

“I believe some people dismiss LTC insurance because they don’t understand the benefits,” said Hans Scheil, in an interview, a financial advisor with Cardinal Retirement Planning in Cary, North Carolina.

Long-term care insurance, of course, is not ideal for everyone. It is generally not recommended for those with minimal assets who are likely to qualify for Medicaid*, the federal-state health insurance program for low income and disabled Americans, said Scheil. Similarly, those with health issues or a family history of chronic illness may find that LTC coverage is cost prohibitive – or even unavailable.

But others heading into their retirement years, he said, would be wise to perform a cost-benefit analysis of long-term care protection and educate themselves about the risks it can potentially help offset. Financial advisors and consultants say long-term care insurance coverage may offer a number of potential perks that all too often get overlooked.

Depending on their assets and unique financial picture, the following groups of people could potentially stand to gain from LTC insurance:

Affluent families

The primary role of LTC insurance is to help pay for costs related to assisted living or residential care facilities, nursing homes and home health care, which can be significant. According to the Genworth [2017] Cost of Care Survey, the national median monthly cost of homemaker services was [$3,994]. Assisted living facilities charged [$3,750] per month, and nursing homes charged [$7,148] for a semi-private room, and [$8,121] for a private room. 1

But such coverage may also serve as an important safety net for your heirs and family caregivers.

By having long-term care protection in place, parents can potentially cover, or at least defray, the costs of any future nursing home and assisted living care they may need without having to deplete the assets they intend to leave for their kids.

Unbeknownst to many, Medicare, the federal health insurance program for seniors who are age 65 or older, typically does not cover expenses related to home health services, nursing homes, assisted living or residential care facilities.

In the event you are too ill or incapacitated to handle financial decisions on your own, LTC insurance may postpone loved ones from having to consider liquidating your assets to pay for needed care, said Scheil. Should they sell the beach house that you had wanted future generations to enjoy? Or cash in your IRA when market conditions are less than ideal?

“The risk goes beyond just being able to pay for LTC,” said Scheil. “It most likely will not be the client/patient making the decisions at the time they need care. It will be their son, daughter, or spouse. Will they know which assets to sell and at what time to sell them? What will be the tax consequences of selling assets or withdrawing from IRAs? Are their heirs qualified to make good decisions and will you have the proper documents in place to empower them.”

Retirees, he said, need a financial plan for covering long-term care costs, regardless of whether they purchase LTC insurance.

Seniors who don’t want to be a burden

Similarly, Phyllis Shelton, a long-term care consultant in Hendersonville, Tennessee, said such coverage gives your adult kids license to live their lives, maintain career momentum, and save for their own retirement as you age, rather than putting their freedom and savings on hold to act as a caregiver.

A 2015 survey by the AARP and National Alliance for Caregiving found 34 million Americans had provided unpaid care to an adult age 50 or older in the prior 12 months. The vast majority (85 percent) were caregivers for a relative, primarily a parent, parent-in-law, or spouse. 2

The average family caregiver, it found, spends roughly $7,000 per year, or nearly 20 percent of their annual income, on out-of-pocket costs, according to AARP estimates, but those who quit their jobs to provide care full-time incur far greater costs.

On average, the AARP/NAC study found caregivers spend 24.4 hours per week providing care to their loved one, and nearly one-quarter provide 41 or more hours of care per week. But they also often interact with healthcare providers, agencies and professionals on behalf of the care recipient.

“Long-term care insurance gives your children permission to not give up their own life,” said Shelton, in an interview. “Most people would rather their kids come to visit them with grandkids in a nice place than to feel like they are a burden. They use LTC insurance to take that decision away from their kids.”

Age in place

LTC insurance can also potentially give seniors the resources they need to age on their own terms.

Rather than having to move into a senior housing facility immediately when they need assistance with activities of daily living, such as housework, meal preparation, transportation and getting dressed, seniors whose circumstances qualify can instead use their long-term care policies to help cover the cost of home health aides who enable them to remain in their own home for as long as possible, said Shelton.

Private insurance gives them more options for home health care, which helps preserve their independence longer and improves their quality of life, said Shelton.

Childless couples

Couples with no kids are also sometimes viewed as ideal candidates for LTC insurance.

Many, of course, have siblings, nieces or nephews and a robust network of friends who are eager to pitch in if care is required. But those who do not, and those who live too far from their family, may wish to protect themselves with LTC coverage, said Shelton.

“People with no children, or nobody who might be able to step in, have to plan even tighter,” she said.

That need not necessarily be in the form of long-term care insurance. Most kid-free couples have fewer financial obligations and potentially more opportunities to save. Thus, they may be in a financial position to self-insure, or pay out-of-pocket for any future care needs they may have.

Age-gap couples

If you are much older or younger than your spouse, you may also benefit from LTC coverage, said Shelton.

“I’ve had clients where an older husband, for example, might say he doesn’t need long-term care insurance, because he thinks his younger wife will be the caregiver,” she said. “I always ask him to consider whether she will ever need to get out of the house to do something for herself. Does she need to sleep? Do errands? Can she physically pick him up if needed? Getting LTC insurance for yourself is how you take care of your spouse.”

Country club senior living?

Not all long-term care is created equal. While some older Americans plan to simply spend down their assets if LTC is needed until they qualify for Medicaid, the federal-state health insurance plan for low-income Americans and those with certain disabilities, they may not like what they get.

Shelton said Medicaid does indeed provide coverage for assisted living and nursing home care, but recipients are often unable to select their first-choice facility, and they rarely get a private room.

“Spending down your assets and then going on Medicaid is not a very good plan as it robs you of your choices,” she said. “Not only might you have trouble picking the facility or your room, but it may be that the only available bed is in a city miles away from your home and family.”

Depending on their benefit amount, seniors who seek choice and a higher-end experience can potentially use LTC insurance to upgrade to a private room at a nicer facility. Some luxe senior living facilities these days offer a continuum of care including home health services, skilled nursing, and assisted living. But they are also modeled after country clubs, complete with gourmet dining, golf courses, and even a spa. “These places are gorgeous, and some even allow you to bring your pets,” said Shelton.

But the high-level of benefits provided by LTC insurance policies to cover such upscale amenities come at a cost. Policies acquired later in life are likely to come with higher premiums that may be cost prohibitive for some.

Long-term care insurance doesn’t just provide coverage for nursing home care. It can also potentially give policyowners the resources they need to age on their own terms, preserve their assets, and protect the people they love. But it’s not the right answer for everyone. As with all financial decisions, however, it’s always best to talk with a financial advisor to determine whether LTC coverage makes sense for you.

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Shelton (May) and Scheil (June) interviews were conducted in 2017 and quotes represent the express opinions of the speakers.  

* For more information regarding benefits provided by Medicare or Medicaid (Medi- CAL in California) visit www.cms.hhs.gov.Medicaid guidelines vary by state. Contact your local Medicaid office for details.

Genworth Financial, “Cost of Care Survey” [2017]

2 AARP, National Alliance for Caregiving, “Caregiving in the U.S.” 2015

The purpose of this material is the solicitation of insurance.

The information provided is not written or intended as specific tax or legal advice. MassMutual, its subsidiaries, employees and representatives are not authorized to give tax or legal advice. You are encouraged to seek advice from your own tax or legal counsel. Opinions expressed by those interviewed are their own, and do not necessarily represent the views of Massachusetts Mutual Life Insurance Company.

Insurance policies issued by Massachusetts Mutual Life Insurance Company (MassMutual), Springfield, MA 01111-0001. Contact your financial professional or for a referral to a financial professional, who will contact you, call MassMutual at 800-272-2216.