People ask me all the time…”should I buy long term care insurance? “ I tell them whether you buy insurance or not, at least have a plan for how you’re going to survive the costs of senior care should the need arise.  They are often surprised to hear that traditional long term care insurance isn’t the only way to be financially prepared.  

Other methods include Self Insuring and also Life Insurance with long term care features. Both of these methods have one huge advantage over traditional long term care insurance…if you don’t use ever use it, you don’t lose it.  What I mean here is that the money you set aside under these two approaches can be recovered either by you or your heirs. With long term care insurance on the other hand, you can put out a lot in premiums over the years and if you never get sick, those premiums are lost forever.  

With certain types of life insurance you can actually access the death benefits to pay for your care costs.  So, if you start to need help with walking, bathing or dressing, you can pay for a caregiver using the life insurance.  Whatever portion of the policy wasn’t used up for care needs, will be paid to your spouse or children. It’s also comforting to know that if you change your mind, you can get a refund of most of your premiums.  

Self Insuring is also an attractive option for many of the same reasons.  The trick here is to take advantage of the fact that long term care costs are tax deductible.  This means investments you make to cover senior care grow faster as they’re tax free! Selecting investment vehicles that can be matched to the timing of when care costs arise is not hard.  Plus there are investment choices that work ranging from no-risk to moderate-risk depending on your comfort level. The main secret is this…

Don’t over-insure, in fact start with just a bare bones plan.  By this I mean if you’re on a budget than cover the most likely scenario rather than every possible scenario.  Historically, statistics show that women need care on average for 5 years and the care needs start in their late 70’s.  For men it’s 3.5 years and it also begins in their late 70’s. Our bare bones care plan should assume a care budget of $4,500 per month. The reason for this is that you would now be covered for either 6 hours/day of in-home care or a Board and Care home if 24-hour care is needed.  

Just cover your shortfall, which means don’t try to insure for all the costs.  After evaluating your finances we will likely find that you already have enough income or assets that could be used to pay for some part of your care.  We can save money by just insuring for the difference.  

If you would like us to help you with your senior care plan, then call 949-939-7022 and set an appointment and we will help you determine whether self insuring, life insurance or traditional long term care insurance is best for you.  We will also help you calculate what your shortfall is and how much you need to set aside now to cover the statistically most likely care requirements you will face.

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