Long-term care insurance is not only for nursing homes

Philip C. Benedict, CFP

By Philip C. Benedict, CFP
Benedict Financial Advisors
Atlanta, Georgia

Member of the national ElderCare Matters Alliance, Georgia chapter

Over the years, I have brought up the topic of long-term care insurance with my clients and friends.   Some got coverage, but many did nothing.  So, I asked a few of the “do nothings” why they took no action.

Gene, why don’t you own a long-term care insurance policy?

“We believe our care is the responsibility of our children.  We certainly sacrificed plenty for them over the years.”

Peter, why don’t you own a long-term care insurance policy?  You can certainly afford the premiums?

“I’m already concerned about leaving our wealth to my wife’s unsuccessful, unmotivated daughter.  To cover this risk only means she will inherit more.”

Gerald and Dot, why don’t you own long-term care insurance policies?

“Unlike most people, we have accumulated enough wealth to cover that risk, so we don’t need insurance.”

Those certainly seem like valid reasons for not insuring the financial costs of care associated with living too long.  And, unlike most people, these four people seemed to have put some thought into their reasons for self-insuring.

I find most people reject the idea of insuring the risk for much more emotional reasons, such as:

  • I don’t want to pay for it.
  • I want the money to spend on other things.
  • “It” won’t happen to me.
  • I don’t want an insurance company telling me I’m not in perfect health.
  • I think most insurance agents are a little sleazy.  One week we see someone at church and two weeks later at a softball game, he comes up and announces that he is a financial advisor.
  • We never owned any life insurance and it looks like we have “won” that bet.
  • I’d rather die than need long-term care insurance.
  • I’d shoot myself first.
  • The premiums can go up.
  • I don’t trust insurance companies.

Minimizing the burden

I’m always amazed that most people equate long-term care only with nursing homes.

Obviously, institutionized care is part of the risk of living too long, but most families of “means” tend to spend their disabled months or years in their personal homes, either dependent on an elderly spouse or children or hired caregivers.

To me, the essence of a good long-term care strategy is to be as minimal of a burden to one’s family as possible.  This will, hopefully, allow family members to provide love and support while hired caregivers can be responsible for more tangible tasks.

This care costs money; however, long-term care insurance policies are certainly not for everyone.  Those who have entered or will enter retirement with limited income may find the premiums too costly, especially if their retirement income does not keep up with inflation.

Others have plenty of liquid wealth to cover the costs of late-in-life care.  However, these same people can easily replace their auto or even their home, so why insure those risks and not the opened-ended cost of late-in-life care?

Also, I have found that individuals who have accumulated decent wealth find it very unsettling to see it disappear in rather large amounts and, at the same time, not knowing when the financial pain will end.

Everyone needs a plan

Many people think this late-in-life care is the responsibility of the children.  I don’t disagree with that; however, it doesn’t always turn out as pretty as the parents believe it will.

Consider these questions, for example:

  • Do you think all children will, or can, contribute equally to the cost of care?
  • Do you think it will bring the children closer together if they have to jointly pay for and agree on what is best for mother or father at this stage in life?
  • Do you think there is any possibility that the in-laws will get involved?

I don’t necessarily think everyone needs an insurance policy to pay for their late-in-life care, but I do think everyone needs a plan to address the financial cost of

this issue.

So, take a little time and put into writing (a couple of paragraphs, a simple outline, understandable notes, or some other format) your plans for late-in-life care.  Tell your family which funds you have earmarked for this “rainy day”.  Tell the children that you want good care and that you are prepared to pay for it with your money – not from their inheritance.

If you do decide to look into insurance to cover this risk, look for an insurance professional who comes highly recommended or who belongs to a professional group like the national ElderCare Matters Alliance.

The simplest way to avoid problems with the financial industry is for you to choose the advisor and not let the salesperson choose you.

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