By: Mark Herschlag
You still feel young and energetic, but you’ve officially graduated the “young” stages of life. You are in your 40s through 60s, earning the honorary designation as being part of the “Sandwich Generation.” That means that you are sandwiched between aging parents who increasingly require your care, and your teenage and young adult children. We don’t need to tell you how much they require…
It is overwhelming people in this age bracket with an ill and/or infirm parent who reach out to us regarding their options for long term care (LTC) insurance.
We do not really need to “sell them” anything. They see the predicament on their own: Caring for one or more parents that require home aides or nursing home care entails exorbitant costs, often as high as $60,000-$70,000 a year per patient, while they have their own rising expenses to worry about. They and their siblings may already be paying for their parents’ long term care. Or perhaps their parents are still swinging the bills, but their retirement money and children’s future inheritance are quickly depleting.
No one wants their children to face the same predicament. Regardless of whether you are already in this predicament or not, there is a high chance something like this will happen to you and/or your children. If you are in your 40s – all the more so if you’re in your 50s or higher – now is the time to consider purchasing some sort of LTC plan.
The earlier you get a LTC plan, the better. Not only do you have the peace of mind that you’re covered even if you or your spouse become physically limited before you’d anticipate, Heaven forbid, but it costs you less. At age 40, your LTC premiums will typically be over 35% cheaper than at age 50, and over 60% cheaper than at age 60.
The guidelines of LTC benefits are relatively simple. Once a physician determines that an enrollee can no longer independently perform two of the six “activities of daily living” -eating, bathing, dressing, going to the bathroom, getting in and out of bed or a chair, and maintaining continence – you stop paying premiums. You begin receiving benefits that cover 100% of the costs of home health aides and therapy, nursing home care, or assisted living facilities – per need.
Some very good news: Married individuals incur lower premiums than singles. Insurance companies are confident that the love and support of your dear spouse will reduce your need for long term care. They’re right, of course! Moreover, benefits can be enjoyed if you live anywhere in the US; this won’t spoil your dream of moving to Florida. If you’re thinking of moving to Israel or another country, many LTC plans can accommodate that too.
The following are the primary LTC insurance options available to you today:
Conventional – Conventional LTC insurance works similar to health insurance. As long as you pay a monthly premium, you are covered in the event that you require long term care. When you sign up, the monthly premiums on these policies are lower than the other forms of LTC insurance, but here are the main catches: Premiums are only locked in for one year, and they tend to rise in the subsequent years – sometimes drastically. Also, just as with health and auto insurance, you have little to no benefit from the premiums you paid if you end up needing little or no long term care in your lifetime.
Life-LTC Hybrid – This is an increasingly popular option that combines the traditional death benefit of life insurance with LTC benefits. You pay a single premium to an insurance carrier that entitles your children to a particular death benefit. If you require long term care in your lifetime, the insurer will compensate you for the costs tax-free. The amount paid towards this care will be subtracted from the death benefit. Whether or not you will require long term care, you and/or your children will receive the same total benefits for the premiums you invest. The peace of mind that long term care expenses will be covered is an inestimable benefit to you and your children.
The cost of hybrid insurance is only nominally higher than for ordinary life insurance, and the premiums are locked in for life. Most people in this age bracket already have conventional life insurance, and we can convert these plans to quality hybrid plans for approximately the same cost they’re already paying. For instance, a 40 year old couple can get a $325,000 (per spouse) hybrid plan for about $4,000 a year, and a $500,000 (per spouse) benefit for about $6,000 a year. This can be a particularly good choice for people with moderate health issues, because for these plans insurers focus primarily on mortality risk – not risk of requiring long term care – and the premiums will still be affordable.
Self-Insurance/Moneyguard – This product is very new to the market. You put aside a certain amount of liquid funds, say $100,000. The money accrues compounding interest year after year, and will roughly triple in value after about fifteen years. The money in this account can be withdrawn tax free for LTC expenses, based on the account’s value at the time. Whatever money is not withdrawn for LTC remains there as a death benefit to your children.
This option is typically the best choice for people with major health issues – health doesn’t affect account value – and/or for those with large pools of money earning little to no interest. One important note: The funds in these accounts are available for withdrawal for non-LTC expenses too at any time. However, in that case, you can only withdraw from the principle, and the withdrawn amount’s proportional interest will be permanently removed from the account.
There is always an option for you
The above mentioned options are the most common options, but not by any mean the only ones. If you don’t believe that any of these are for you, or you’ve been disappointed by the options other agents offered you, don’t despair. We offer a wide variety plans from a wide variety of A+ rated insurers, and we’ll be glad to help you find the best options for your situation.
Another important note is that all insurers rate people’s health differently. If an insurer declined you, or gave you an exorbitant premium, due to your health, that doesn’t necessarily mean that you are in bad shape. We can often find an insurer that will rate your health to be satisfactory, even excellent.
Just give us a call please! You and your children will be very thankful you did.