Do you know someone who was blindsided by an unexpected illness? Or maybe someone who had zero to few choices when it came to care for a loved one? I specialize in supporting my clients, so they are prepared and armed with strong options when it comes to Long Term Care.

As you can imagine, planning for long-term care (LTC) is essential to any comprehensive financial strategy, yet it’s often overlooked. As a financial advisor, I’ve seen firsthand how unexpected health issues can significantly impact even the most well-thought-out retirement plans. Long-term care insurance (LTCI) can play a crucial role in protecting clients’ assets, providing flexibility in their care choices, and reducing the financial burden on families. Here, I’ll outline why LTCI is important, what it covers, and factors to consider when advising clients.

Why Long-Term Care Insurance Matters

Long-term care refers to a range of services designed to meet health and personal care needs over an extended period. Unlike traditional medical care, which aims to cure or treat an illness, long-term care primarily helps individuals maintain quality of life despite chronic illness, disability, or cognitive impairment. Services can range from assistance with daily activities (like bathing, dressing, and eating) to nursing home stays and full-time home health care.

One of the greatest challenges in retirement planning is estimating how much long-term care an individual may need, if any. The U.S. Department of Health and Human Services estimates that about 70% of people turning 65 will need some form of long-term care during their lifetime, and the cost of that care can be substantial. In 2023, for instance, the average annual cost of a private room in a nursing home was over $100,000, and rates are only expected to increase. Without LTCI, these expenses can quickly deplete retirement savings.

What Does Long-Term Care Insurance Cover?

LTCI policies vary widely, but they generally cover care provided in various settings, including:

1. Home Care: LTCI can cover the costs of in-home care, such as assistance with daily activities or medical care provided by a nurse or therapist. This allows clients to stay in their homes, which is often preferable for comfort and quality of life.

2. Assisted Living: For clients who need more help than can be provided at home, LTCI can cover expenses related to assisted living facilities where professional caregivers provide support.

3. Nursing Homes: If more intensive care is needed, LTCI often covers nursing home costs, which tend to be the most expensive form of care.

4. Adult Daycare: Many policies include adult daycare services, providing a safe place for those needing supervision and care during the day, while family members work or rest.

Key Benefits of Long-Term Care Insurance

1. Protecting Retirement Savings: Long-term care costs can quickly erode savings, particularly in retirement. With LTCI, clients can help safeguard their hard-earned assets against such risks, preserving funds for other uses or inheritance.

2. Relieving Family Members: Without insurance, caregiving responsibilities often fall on family members, both financially and emotionally. LTCI can reduce this burden, allowing family members to spend quality time with their loved ones rather than coordinating or providing care.

3. Greater Choice and Flexibility: LTCI policies often cover a range of care options, giving clients more flexibility in choosing the type and location of care they want. This flexibility can greatly enhance quality of life.

Important Considerations When Choosing LTCI

When advising clients on LTCI, several key factors need to be considered:

1. Age and Health: The cost of LTCI depends heavily on age and health at the time of application. Premiums tend to be more affordable for younger, healthier applicants, so I often recommend that clients consider LTCI in their 50s or early 60s.

2. Policy Features: Policies vary significantly in terms of benefits. Look for features like inflation protection, which can help maintain purchasing power over time, and elimination periods, which are essentially waiting periods before benefits begin. Policies with shorter elimination periods are generally more expensive but offer quicker access to care benefits.

3. Benefit Period and Amount: Clients can select benefit periods (usually between two to five years or lifetime coverage) and daily or monthly benefit amounts. Longer coverage periods and higher benefits come with higher premiums, so balancing adequate protection with affordability is essential.

4. Hybrid Policies: Some clients may prefer hybrid policies, which combine LTC coverage with a life insurance component. These policies can be attractive because they offer death benefits if long-term care isn’t needed. This “use it or leave it” approach ensures clients feel they’re getting value from their policy either way.

The Bottom Line

Long-term care insurance isn’t a one-size-fits-all solution. For some, self-funding may be a viable option; for others, LTCI could be indispensable. As financial advisors, our role is to help clients assess their health, financial situation, and preferences to determine the best course of action. LTCI can offer peace of mind, protect assets, and provide flexibility in care, making it a vital consideration in retirement planning. Taking a proactive approach and discussing LTCI before it becomes a necessity can help clients prepare for the future, ensuring they’re financially secure and that their care needs will be met on their terms.

This material contains only general descriptions and is not a solicitation to sell any insurance product or security, nor is it intended as any financial or tax advice.

Want to schedule a consultation with Eric? Email him at eric@rockcastlewealth.com