The last 30 years have seen the ageing Boomer population and their parents need a plan to pay for the burden of caring for a loved one as their health, both mental and physical, begin to decline. Generally this is known as ‘custodial care’.
As most are aware by now, Medicare, health insurance plans from commercial insurance companies and retiree medical insurance plans DO NOT pay for custodial care. The exception is under certain circumstances, Medicare will for a short period of time.
So the insurance industry began to offer Long Term Care Insurance (LTC) about 30 years ago. In the early stages, it was intened to pay for Nursing home expenses, then included assisted living, and later home health care as well. The benefit period formerly lasted for life, and has been reduced to only 10 years in most products. As the insurance industry and this market has matured and continues to grow in potential buyers, the emphasis of the care is shifted to “ageing in place” and the need for home care, and away the facility care. The insurance industry has adjusted accordingly, but is finding that the cost and the risk is not the same as the initial need. The older policies are looking like gold and the newer policies, not so much.
However, the insurance industry and financial planners and wealth managers all agree the need to assure the cost of this in ‘Retirement years” is not only a tremendous and possibly unaffordable expense, it is an aspect that must be considered and accounted for in the retirement plan.
While LTC products provide the money to pay these tremendous expenses in the event of a claim, one commonly overlooked aspect of this “plan” is that many owners will not use the insurance and will have paid a very high total cost for 30 years of peace of mind. The insurance agent will generally avoid this aspect of the consultation. So while LTC is an option there are other insurance options: Certain life insurance policies have “Chronic illness benefits” which address this need and since we will all eventually pass on, the unused portion of the death benefit (which is the amount of coverage for the chronic illness benefit) is paid tax free to the beneficiaries, and there are annuity products that have lifetime income guarantee benefit riders that can address this, some increase the amount in the evento of a qualifiying trigger simial to the LTC triggering events, of course, other retirement income streams can be utilized. A single widow whose social security, and assets at a conservative withdrawal rate, might have adequate resources, IF the need is there. Her budget changes to pay for the care rather than house payment or rent and utilities. A reverse mortgage is also a resource that many misunderstand, but could provide the funds to help provide the care.
So formulate a plan and then retire with peace of mind.