How Long-Term Care Insurance Normally Works Episode 85

Did you know that, according to Time magazine research, your chances of getting attacked by a shark are 1 in 11.5 million. I’ll remember that next time I contemplate taking a swim in the ocean.
How about this: Did you know there is a 1 in 250 chance of having identical twins? That one caught me by surprise. I figured it would be higher. The pictures this week are from our BIG snowstorm over the weekend.
David and Amelia in the snow
And did you know you have a 1 in 10 million chance of becoming a rapper? I think the statisticians would take me out of the control group if they saw my lack of ability to even tap my foot in rhythm. I tried piano lessons twice as a kid and I tried guitar lessons as a teen. Through those ventures, I came to appreciate musicians and figured out I wasn’t going to be one of them.
All Jokes Aside, What Are We Here For? 
Did you also know that the age of those requiring long-term care is actually
decreasing? The stats shared in this newsletter are taken from Genworth.
In 2010, 81% of care recipients were 65 or older. In 2018, 57% of care recipients were 65 or older. So, younger people are needing long-term care. I can personally speak to this as my mom was only 63 when she began needing long-term care assistance.
If a long-term care need hasn’t impacted you or your family already, it may one day.
Remember, that Medicare will only pay 100% of the cost at a skilled nursing facility for 20 days. Sometimes after a fall or accident, folks need a little more help to recover before they transition back home. Also noteworthy, 21% of people require long-term care after an accident.
Amelia, David's daughter in the snow
The need for knowledge about this subject is only going to increase. By 2030, one billion people worldwide will be over 65. And until 2030, ten thousand Baby Boomers will turn 65 each day. 70% of individuals will need long-term care in their life-time. On average, people that need long-term care will need it for three years.
The median monthly cost in 2020 nationally:
  • For in home homemaker services was $4,481.
  • For in home aide was $4,576.
  • For an assisted living facility was $4,300.
  • For a nursing home facility semi-private room was $7,756.
  • For a nursing home facility private room was $8,821.
What Do We Do Now That We Know This?
That’s a lot of information about something most of us don’t really want to think about. What do we do with this knowledge? Let’s start with what has historically been done.
Someone may learn the above information and say, “I want a long-term care policy.” Here’s how they generally work: the person may think to themselves, “Well, if I need help and I need the most help, I guess that would be about $8,821 per month. So, I’d like a policy that will pay that amount.”
Then they may choose to have a 30-day elimination period. What this means is 30 days after you needed care, the policy will begin paying you. Sometimes they may add an inflation provision. It’s common for people to experience sticker shock when they figure out how much their coverage will cost.
If the person can could afford the coverage, I’ve generally found that they probably started it in their 40s or 50s. So, the insurance company knew they would be paying for it for many years before they actually used it.
Each year the price may change for the policy, and if the insurance company that issued the policy found a lot of people in a certain state were needing the policy to payout, they may seek to increase the rates. I’ve talked with numerous people who saw their rates sore.
If the person in the above example could not afford it or was unwilling to pay for the above scenario, they may lower the monthly amount the policy will pay and increase the elimination period to 60, 90, or even 180 days.
But here’s the kicker. It’s like your home or auto insurance. If you never use it, you normally lose it and all the money you put into it is gone. Sometimes you can pay extra for a return of a premium provision that will return your money if you don’t use the benefit. This may increase the cost and may make it less palatable.
Amelia with her snow covered playhouse.
What’s The Solution?
If you have savings, you may have enough to self-insure. If you don’t have assets, hopefully your family can help. Another idea that has become popular in recent years are reverse mortgages. I don’t work with these, but the topic often comes up in continuing education classes that I attend. These will probably become a larger trend.
The insurance companies have seen the issues with what I’ve shared, and new ways of obtaining help with long-term care have emerged.
On Thursday January 27th at 1:30 and 6:30, I will be hosting a webinar, and I’ll share with you the two best ways to obtain coverage without it being a “use or lose it” scenario.
I’ll go over the good, the bad, and ugly, so that you can be informed. If you know of a friend or family member who would benefit from learning about long-term care, please let them know about these webinars.
In order for people to be able to ask questions after the presentations, each webinar will be limited to ten households per webinar.
Register Here for the January 27th at 1:30 PM webinar: Click here
Register Here for the January 27th at 6:30 PM webinar: Click here
Until next week,
David C. Treece,
Financial Advisor
Did you miss one of our last newsletters?
How To Use Compounding to Effect Your Life: Click here
You Were Made To Strive: Click here
Don’t Sit on Too Much Cash: Click here
Investment advisory services offered only by duly registered individuals through AE Wealth Management, LLC (AEWM). AEWM and Clients Excel, LLC are not affiliated companies. Investing involves risk, including potential loss of principal. Any references to protection, safety, or lifetime income, generally refer to fixed insurance products, never securities or investments. Insurance guarantees are backed by the financial strength and claims paying abilities of the insuring carrier. This podcast is intended for informational purposes only. It is not intended to be used as the sole basis for financial decisions, nor should it be construed as advice designed to meet particular needs of an individual’s situation. Clients Excel is not permitted to offer and no statement made during this show shall constitute tax or legal advice. Our firm is not affiliated with or endorsed by the U.S. Government or any governmental agency. The information and opinions contained herein provided by third parties have been obtained from sources believed to be reliable, but accuracy and completeness cannot be guaranteed by Clients Excel.

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