ltc, assisted living, insurance, long term care insurance

Long Term Care insurance – Protecting a Legacy

My wife and I just purchased an Asset Based Long Term Care (LTC) policy.  Sue is 46 years old and I am 48 years old. Why would we do this, likely, 30 years before we will use it? To protect the legacy we intend to pass on to family and valued charities, and in recognition of a personal experience that taught me ‘insurability’ is completely unpredictable. In 1990, I was in my third year at the US Naval Academy and my mother informed me she had been diagnosed with Parkinson’s disease. She was 51 years old and otherwise very active and in good health. Her symptoms for the first five years were relatively minor and controlled well by medications, followed by 10 years of relatively good mobility in an assisted living facility and the final decade in a full care nursing facility with no mobility.

Extended LTC events destroy family wealth. It is probably not a surprise to anyone when I state that getting varying levels of assistance in performing her activities of daily living (ADLs) during her 26 years of struggling with this disease, wiped out every penny she had. Thankfully, events of this severity are still not that common, but it is important to recognize diagnoses of Parkinson’s and Alzheimer’s disease which have an average need for care over 8 years, and LTC needs in general are all on the rise – One in five people today require care for five years or longer, and fully 70% of Americans turning 65 today will need LTC in their lifetime. The average annual cost of full-time home health assistance is close to $45K in 2017, and for the same services in a shared-room nursing facility it is over $60K/year.

Like most aging grandparents, my mother had plans to give her unused savings to her grandchildren, and to her church. But that option was removed at age 51 when her diagnosis caused her to become ineligible for LTC insurance, even with virtually no symptoms for the next few years. Like my mother and I’m sure most of you reading this, my wife and I have big plans for enjoying the wealth we worked hard to grow and then giving it to those most dear to us – a legacy to our family and to those service organizations that we believe are making the world a better place. So we bought LTC insurance in our 40s, the only policy that can guarantee our plans will come true.

What is ‘Asset Based’ LTC and why is it different? First, let’s review the more common version of LTC coverage, ‘health insurance based’ plans. These plans popularized by Genworth and Prudential over the last 30 years are referred to in this manner because like health insurance (or car insurance) you pay each year for the option to use LTC if it is needed, a system referred to as ‘use it or lose it.’ Starting that type of plan in our 40s with no expectation to use it until our 70s barring one of these catastrophic diagnoses would be very expensive and wasteful. Other disadvantages of these plans are that they come with a catastrophic cap to prevent their use for more than 4-5 years (defeating the specific purpose we bought ours), and they come without a guarantee against increasing premiums. Since retirees have had premiums increased on active policies several times recently, they have nothing to show for years they’ve paid premiums and not needed the benefits, and they are bound by a cap on the number of years they can receive the benefits, most Americans have no LTC insurance; like my mother, they remain completely exposed with no plan whatsoever.

Our Asset Based LTC policy is vastly different. We purchased a cash value whole life insurance policy that can be used entirely for LTC expenses if needed with any remainder going to family as a death benefit. The premiums of our policy are guaranteed not to go up, and the benefits are guaranteed to continue for the rest of both of our lives and will even rise to keep up with inflation starting today. It is truly a good feeling knowing we’ve completely removed the concern from our future that worries a majority of retirees today, that of LTC expenses destroying their assets in retirement. If you’d like to learn more about how you can put this behind you as my wife and I did, please ask your Wealth Strategist to talk to you about Asset Based LTC options.