According to the administration of aging, 70% of people who are 65 today will require some type of Long-Term Care in the future, which makes sense because most of us have personally experienced a loved one needing some type of custodial care (eating, bathing, dressing, transferring, toileting, and ability to control movements of the bowels and bladder). Benjamin Franklin famously said, “If you fail to plan, you’re planning to fail.” Do you have a plan?
Americans spend around $500 billion annually on Long-Term Care, the average length of stay is around three years, and people must spend down their assets to almost nothing before going on Medicaid. Currently, the cost of Long-Term Care is around $150,000 per year with an average of three years of care. Which means to self-insure for Long Term Care you need $450,000 per individual, and $900,000 for a couple and you will need this to keep up with inflation and not be subject to much market risk. This is not chump change the Long-Term Care planning discussion is real, and it is complicated.
Sometimes willful ignorance can get the best of us ever heard this one: “My spouse will take care of me, and our kids will take care of them”? Think about your oldest living relatives right now who are married, could either one of them pick the other up and put them into a chair? Did your parents, grandparents, aunts, and uncles probably think the same thing? What really happened?
Let’s Talk about the 800 pound Gorilla in the Room:
- More policyholders activated their long term care benefits, and the actuaries at the insurance companies made a miscalculation. Oops! Sorry!
- Insurance companies then had to increase the premium as a result.
Did the insurance companies intentionally do this? No, they underestimated the claims, more policyholders triggered benefits than expected. Does it matter now? Not really. If anything, it proves the importance of proper planning around long-term care.
So, what about the policyholders that didn’t have a bad experience? They made out like bandits because policyholders received way more in tax-free benefits than they ever paid in premiums. Hopefully their children send thank you cards to the agent who convinced their parents to purchase the policy because they didn’t have to deal with a nightmare as a result.
“Heaven forbid” these people speak up, or we listen to what they have to say about their experience. Now! Let’s focus on the people who haven’t triggered their benefits and complain about LTC insurance companies increasing premiums and ripping off the policyholders.
In the past, people understood the risk and were open to LTC insurance. In fact, the conversation was around who has the best deal for Long Term Care insurance! Was it GE Capital? John Hancock? CNA? Today, the conversation has changed. Is it a good idea to purchase LTC insurance or to self-insure?
I am not sure when or how the conversation transformed, but it definitely changed. If you had said you were going to self-insure twenty five years ago on the golf course, these people would have laughed at you. Nowadays if you ask them all four will likely say “I am just going to self-insure, yeah me too, me too, me too. But they have no idea what that even means!
Good news! There are more options now than ever when it comes to using insurance products to plan for long-term care. New “Leveraged Long-Term Care” solutions have guaranteed non-cancellable premiums that can never increase, provide tax-free benefits, and return your money if you don’t trigger long-term care benefits. How many people really understand these policies? Not very many because they are out over their skis tips.
Here’s the real deal, a lot of people cannot qualify for long-term care insurance because it involves medical underwriting, so they are forced to “self-insure” for Long-Term Care.
If your only option is “self-insuring”, we at Pacific Insurance Group have come up with a “LongTerm Care Self-Insured Plan”, but it will likely involve collaboration with family members and does not provide tax-free benefits.
If you think you are insurable, now is the time to take advantage to the tax code and grandfather a policy. With American’s unfunded obligations regarding our national debt, social security and Medicare issues, it is likely the tax code will be less favorable in the future.
We encourage people to explore “Leveraged Long-Term Care” products and guarantee tax-free long-term care benefits.
Our “Long-Term-Care Self-Insured Plan” has to do with utilizing section 213 of the IRS tax code, but, just like the “Big Mac sauce” we are trying to keep it a secret for as long as we can. Give us a call or reach out and we would be happy to show it to you.
You can thank my parents for that one. My first memories are from the early 1980’s, crawling around my mom’s feet while she was making calls to people who requested information about LTC insurance. Ask any one of my three siblings, the only time you were allowed to interrupt mom on a phone call is if you needed to go to the hospital.
