Investor Column | Don’t roll the dice on long-term care as you get older

It’s possible that the day will come when you will not be able to manage on your own. While we are living longer which is good news, it also increases the chance of needing long-term care as one ages.

Long-term care covers all the assistance one may need with the activities of daily living (ADL’s) or if a chronic illness or disability should you be unable to care for yourself.

Professional care can be delivered in several ways. They can be provided at home, in an assisted living facility, memory loss units, at nursing homes and at adult day care.

There are six activities for daily living. They are continence, dressing oneself, toileting, eating, bathing and transference. Transference is the ability to move oneself into or out of a bed or chair.

Generally, long-term care insurance policies begin to pay benefits when you are unable to perform two of the six ADLs or you have severe cognitive impairment such as Alzheimer’s disease and other forms of dementia.

People continue to believe that private health insurance or Medicare will cover ong-term care. Typically, health insurance pays only for doctor and hospital bills. Medicare will cover skilled care for up to 100 days. That coverage is dependent on certain requirements to be met.

Medicaid would kick in only after you have spent down your assets. In addition, you would have less choice about the care you receive.

Assuming family would provide care is an imperfect plan. Caregivers are often impacted negatively. They often experience emotional suffering and financial hardships as well.

Long-term care insurance puts you in control. There are four big reasons one should consider long-term care insurance:

• It allows you to stay in your home or a setting of your own choice. I can’t emphasize enough the importance of this benefit
• It helps you to maintain your independence and dignity.
• It can help to protect your retirement assets and income. According to a Genworth 2017 Cost of Care Survey the median cost for a home health aide working an eight-hour day is about $49,000 annually.
• It helps relieve financial and caregiving pressure on your family.

Determining the kind and amount of benefit you need depends on several things. Your budget, of course, is important and so is your geographic region and what kind of care you think you want. Will you have some family or close friend assistance.

Some of the questions that are important to ask when determining the amount of coverage that is right for you include the following: What is the average cost of care in my area? Do I want a policy that covers all care or will I be able to supplement the cost of care from retirement assets? Does my family have a history of long-term illness such as dementia? Has anyone in my family needed long-term care? What assets do I want to preserve and pass along to my heirs?

Long-term care insurance like most insurance is best purchased at a younger age. From my experience, though, most people look for long-term care insurance in their 60s.

In addition to purchasing as young as possible to save on cost, many plans offer preferred health discounts for those in exceptional health. While most policies are issued at standard rates a preferred rate may save you ten percent or more. For married couples or partners many insurers offer discounts when they apply for coverage together.

There are partnership programs offered through federal and state governments. These programs were developed to provide incentives to reward those who buy long-term care insurance. Federal tax incentives may allow your premiums on qualified policies (and most policies are), to be deducted as part of your medical expense on your federal tax return. Many states have tax incentives for residents that purchase policies. And finally, there are tax incentive for business owners to provide coverage for employees that may be deducted as a business expense.

While traditional policies are still available, the introduction of “Hybrid” policies several years ago have been a game changer. Hybrid policies link long-term insurance with life insurance or an annuity. With policies based on life insurance the long-term care benefit is a rider that is attached to the policy. If never used the death benefit of the life insurance is there for your heirs.

Life insurance, for many, is protection against dying too young. Later in life when the protection is not needed policy owners may let them lapse. I strongly recommend that anyone in this situation, before they let them lapse, to consider exchanging that policy for one that offers a long-term care benefit.

It’s best not to roll the dice on long-term care.

Information sourced from Life Happens, a nonprofit organization dedicated to helping consumers make smart insurance decisions.

Michael T. Doll, A.A.M.S. is an investment planner with Harbor Financial Services, can be reached at 941-896-2473 or at mtdoll@harborfs.com. This is the view and/or opinion of Michael T. Doll and not necessarily the views and/or opinion of Harbor Financial Services, LLC and SEC Registered Investment Advisor, whose main office is located in the state of Alabama