Why Long-Term Care Insurance should be part of your portfolio

Why Long-Term Care Insurance should be part of your portfolio

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However, a real crisis is now underway. When the U.S. population ages and a tidal wave of baby
boomers hits retirement age, seven of these boomers will soon be confined to a nursing home or
an assisted living facility. The average annual cost of nursing home treatment is $250,00, and
Medicaid charges little on nursing home care. This leaves most seniors with two options: selling
their assets and paying bills based on Medicaid, or maintaining assets with long-term insurance
policy.

A long-term care package is available to someone who is 55 years of age or older and designed
expressly to cover the costs of nursing home isolation or assisted living. Long-term care plans
may be obtained individually or, according to financial advisor Steven Daar, as a life insurance
brace. Long-term care levels differ based on the applicant’s age , gender , health background and
lifestyle. The patient who has a greater risk of incurring an illness that will put him or her in a
nursing home and who applies for insurance at a higher age would have a premium higher than
the patient with little health problems who applies at age 55.

Long-term care needs will bankrupt even seniors who are most prepared. This will take a
portfolio of $2.9 million, producing 3.5% of income just to fund one year of nursing home
treatment at today’s $100,000 annual expense. Many retirees struggle to invest in an IRA or
401(k) account. A retired person who is single without dependents and does not intend to give
his or her assets to a partner, relative or organization may choose to invest what they have and
then apply for Medicaid. Medicaid eligibility requirements vary from state to state, and
navigating the fine print road to acceptance also requires an elder lawyer’s assistance.
Nevertheless, a disabled person who is married, who has children or who wishes to move his or
her assets to a charity should have a long-term care policy to protect those assets and the existing
living needs of his or her spouse.

Georgia health care advocate Cindy Holtzman argues that the presence of filial obligation laws in
30 states is an important concern for the elderly with grown children. A child is responsible for
the nursing home bills of his or her parent if the parent can not pay. While such laws have been
widely ignored in the past, the increasing cost of nursing home treatment combined with cuts in
Medicaid funding has prompted nursing homes to start implementing such laws and file civil
suits against indigent parent children. For example, in the state of Pennsylvania, a daughter was
sued for their care by a nursing home for over $300,000. The home lost the lawsuit so the
daughter had to hire an attorney to prove she couldn’t afford the charge. Many states, such as
Ohio and Massachusetts, can prosecute adult children who refuse to provide long-term care for a
parent. These charges can result in either a fine or imprisonment, and would appear on criminal background check. The harm to the parent-child relationship following participation in one of
those cases that outweigh the actual financial loss, but both can be avoided by buying a
long-term care policy.

Many financial planners advise postponing long-term care insurance purchases well after
retirement age, but it may be wise to start shopping before retirement. Most insurance providers
are withdrawing their long-term care plans, and those insurers currently providing long-term care
plans are raising premiums significantly. Insurance firms make money by paying premiums to
invest in debt or money market securities, and then from the income stream they earn from
interest and dividend payments. Despite interest rates for Treasury bonds running above 3% and
financial markets charging less than 1%, these companies are losing financial on long-term care
policies. Despite growing competition for long-term care plans, there could be less insurers to
choose from. High demand combined with small supply implies high commodity costs.

Any type of insurance is the last thing that someone wants to buy, but as life’s seasons change, so
will life’s demands. A worry-free retirement starts with sound financial planning, which will
include long-term care insurance.

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