Thursday, February 28, 2019

Roll the Dice on Trying Long-Term Care Insurance

By Marie Bradby

The odds are high that you will need help with daily living care. “About 70 percent of us will need some form of long-term care,” says Eugene “Buster” Kenny, a long-term care consultant with New York Life.

The costs “can put a big dent in or completely deplete a person’s savings, depending on how long it is needed,” Buster says. In Kentucky, healthcare costs can range from $30,000 a year for four hours of daily care at $20 an hour, and up to $80,000 a year for skilled nursing home care, he says.

“People typically purchase long-term care insurance to protect their retirement savings and retirement income, and to protect the family from providing the hands-on care,” he says.

Clients typically buy policies to offset only part of their risk and then use Social Security, other income, and savings to supplement their care.

“Long-term care insurance policies today can cover any type of care, whether you are staying at home, in a memory care unit, or at a skilled nursing home,” Buster says.

Long-term care policies helped his parents to pay for healthcare costs. “I started talking to my dad and stepmom for years before they purchased a policy, and every year, I had to talk him into renewing it.” His stepmom’s policy covered only 50 percent of the risk, $3,000 a month for seven years, Buster says. His dad had set up a $500,000 trust for her. So the Kenny’s supplemented the cost of his stepmom’s care with $1,400 a month in Social Security and pulled the rest out of the trust account until the policy was exhausted. Now the trust still has over $350,000 in it for his stepmom’s care.

“If Dad hadn’t purchased the policy, there wouldn’t be any money left in the trust and she would be on Medicaid,” Buster says. There are new policies to fit people’s needs.

Other Options
“The most popular version is a life insurance policy that has a long-term care rider built into it,” Buster says. “You can get significant leverage for long-term care, and also create a death benefit. Most policies come with a money-back guarantee. You can get 80 to 100 percent back if you decided to walk away someday.”

For example, a healthy female 55 years of age, could turn $100,000 in the bank into a policy worth $179,000 in death benefit, and $537,000 in long-term care, Buster says. At age 65, $100,000 would give you $122,000 in death benefit and $366,000 in long-term care.

A hybrid long-term care annuity is another option. This product provides double the amount of purchase for long-term care. For instance, if you put $100,000 into a long-term care annuity, you would have $200,000 to spend on long-term care.

Most people will never go to a nursing home, Buster says. “Eighty percent of all care starts in the home, and 50 percent of people never leave their homes,” he says. “Only 30 percent will go to assisted living. You don’t need to insure 100 percent of the risk. A little bit of long-term care insurance goes a long way. My stepmom’s experience is a great example of that.”

Extra tidbit: You might be doing yourself a huge favor by moving out of your home.


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