Long-Term Care Insurance Update

The Centers for Medicaid and Medicare services Medicare Handbook reports that  seven out ten people will need some kind of long-term care (LTC).  A recent Nationwide Retirement Institute poll found that only 14% of adults aged fifty and older have LTC insurance.  Many people believe that Medicare pays for LTC costs.  Not true. Medicare payments for skilled care are limited.

As a result, the chance that a LTC event will negatively impact a person or family’s financial condition is great.   The most recent Genworth Cost of Care Survey estimates that the median cost of care ranges from $3,813 a month for a person to receive care at home to $5,545 a month for  private skilled nursing care.

Many do not see the value of paying premiums for stand alone insurance and would rather take the risk.  Consequently, the insurance industry is adapting.  More companies now offer life insurance with LTC or chronic illness riders.  According to a Milliman survey, sales of “hybrid” products is rising.  In 2016, 24% of universal life insurance policies contained a LTC rider.  Buyers like the idea that they will get something back for the premiums they pay.

If you are considering long-term care insurance, this is a good time to review your existing insurance.  Policies with cash value may be suitable for an exchange to a new policy.  There are some ways to fund LTC that can be more favorable from a tax standpoint.   Some businesses entities can deduct LTC premiums as a business expense.  Up to some limits, premiums paid from a health saving account are qualified medical expenses.

So, if you have haven’t given LTC much thought lately, maybe you should now. Although LTC insurance products are changing, a person’s age and health must still be considered when writing a policy. Finally, if you aren’t interested in LTC insurance, you should think about who will provide care if you need it.  Most of the time, care comes from a family member.  No one ever wants to be a burden, but it seems like not insuring for a long-term care event will increase the chances that that will happen.