CMP Financial Planning

Making Long Term Care a Part of Your Financial Plan


In last month’s Disability Insight article I discussed why my wife and I decided to buy long-term care insurance. For most Americans, long term care is the single biggest risk factor in their financial plan; however, since the annual cost of this insurance can run in the two to three thousand per person range this coverage might be considered more of a luxury than a necessity.  Yet the risk of long term care, and its potential to deplete a family’s savings remain, particularly for special needs families interested in leaving behind legacy assets upon their death.
Stated differently, the potential catastrophic costs of long term care is too great not to account for them in your financial plan. It is true that Medicaid can currently pay for the nursing home care  parents might need, but at the expense of having to “spend down” any potential assets that those parents might want to leave for their child with a disability. 
For those not willing to consider the cost of long term care insurance, self-insurance is the next best option.  Self-insuring requires planning for and saving sufficient assets to pay for the long term care of one or both of the parents.  One can also choose to hedge on the cost of long-term care insurance by buying limited coverage that makes the premiums more affordable, but will require more out of pocket payments if long term care is needed.
How much long-term care coverage to buy is just one of many factors to consider in choosing the best long-term care policy. Other factors to consider include: elimination periods, inflation protection and services covered, just to name a few!  Because of the complexity involved in choosing the right coverage, I would highly recommend working with an independent long-term care insurance broker to help guide you through the best coverage options. Another option to consider, particularly for wealthier families, are hybrid polices. This popular long term care insurance option combines both long-term care and life insurance policies in order to provide a guarantee of some death benefit even if long term care benefits are not used. 
Planning for long term care presents yet another challenge for special needs families.  With life expectancies and long-term care costs increasing, it is incumbent on families to plan for their long term care needs for themselves as well as the needs of their child with a disability.  
References:     1.     Schism, Leslie, “Long-Term-Care Insurance Isn’t Dead. It’s Now an Estate-Planning Tool”, https://www.wsj.com/articles/long-term-care-insurance-isnt-dead-its-now-an-estate-planning-tool-1528387201. June 11, 2018. Wall Street Journal.2.     Stark, Ellen. 5 Facts You should Know About Long-Term Care Insurance. March 1, 2018. AARP Bulletin, https://www.aarp.org/caregiving/financial-legal/info-2018/long-term-care-insurance-fd.html

By Barry Jamieson