By Cristin Harris Rigg, CFP®, CDFA™
Personal Wealth Advisor

 

January 2019 brought news that several long-term care (LTC) insurance carriers will significantly increase their customers’ premiums over the next few years. This development is significant for individuals and couples who are wondering if they need long-term care plans and, if so, what they can do to ensure their plans offer sufficient and affordable coverage.

It is important to understand the costs and tax benefits of long-term care insurance before purchasing a plan, and to consider alternatives to long-term care insurance policies. Harris Financial Advisors has the expertise to advise you on the appropriateness of long-term care insurance given your specific healthcare and financial goals.

The long-term care insurance landscape is changing

Premium costs for LTC policies have been steadily increasing for decades, and will continue to do so for some time as more and more members of the Baby Boomer generation retire and draw on both public and private care benefits, and as more Americans in general live longer.

Regardless of age, individuals and couples should determine what they want and what they may require when it comes to care due to chronic illness or prolonged disability; this includes understanding the coverage options, financial costs and tax benefits of long-term care insurance policies and their alternatives.

While a complex undertaking, individuals and couples, with the help of their financial advisors, should closely examine long-term care options and LTC policy features in the context of their financial plans.¹

Government medical benefit programs and standard health insurance policies typically do not provide full coverage for long-term care such as professional help with daily bathing, dressing or eating in various environments that include residences, nursing homes or assisted living facilities. Additionally, there may be some benefit to those who purchase a LTC insurance policy at a younger age; historically-static initial premium prices increase as the age of first-time LTC policy purchasers rises.

This means aging adults must weigh between paying long-term care expenses “out of pocket” or purchasing a LTC policy that will pay a fixed-dollar amount toward daily care costs.

Affording long-term care—for the long-term

Harris Financial LTC Ins Options-Scenic RoundaboutWhile a long-term care policy may be an obvious choice for ongoing care, there are alternatives to help offset costs and maintain sufficient coverage, including hybrid LTC/life insurance, life insurance chronic care riders, deferred-income annuities and the option to self-insure for those with significant assets.²

With an understanding that long-term health care costs vary widely throughout the country, and mindful that there is no “one size fits all” when it comes to affording long-term health care, Genworth’s Cost of Care Survey 2018 provides helpful information about current and future health care cost patterns, and allows individuals and couples to calculate the estimated cost of multiple long-term care options in their state and areas of residence.³

Costs in the changing and complex LTC insurance marketplace are likely to continue to fluctuate or rise in the coming years – and will continue to differ from state to state – so it’s important to work with a financial advisor on how best to solve for your long-term care objectives. Contact Harris Financial Advisors to begin the conversation about how to support your fiscal and physical well-being at any age.

 

1. Insurance Information Institute. “What features of long-term care policies should I focus on?” https://www.iii.org/article/what-features-long-term-care-policies-should-i-focus

2. Lankford, Kimberly. Kiplinger Personal Finance, “How to Afford Long-Term Care”. January 31, 2019. https://www.kiplinger.com/article/insurance/T036-C000-S002-how-to-afford-long-term-care.html

3. Genworth. “Cost of Care” https://www.genworth.com/aging-and-you/finances/cost-of-care.html