12 Jan Should we get long-term care insurance?

Q. My husband is retired and collects Social Security and a pension. I’m also retired and I collect Social Security and receive funds from my 401(k). We are concerned about long-term care issues because we are legal guardians of a grandchild who is still in high school. We are both in excellent health but we are concerned about protecting our assets just in case. Should we get long-term care insurance?
— Grandma

A. It sounds like you should definitely investigate long-term care insurance (LTCI) in more detail.

Protecting your financial resources is always important, but it’s even more important because you have a minor still in the household.

Long-term care (LTC) refers to a broad range of services that assist those with chronic conditions, such as cognitive impairment or a need of help to perform the essential activities of daily life (ADLs), such as dressing, bathing, eating, transferring in/out of a bed or chair, continence and toileting, said Andrew Novick, a certified financial planner and estate planning attorney with The Investment Connection and Brookner Law Offices in Bridgewater.

“According to a U.S. Department of Health and Human Services report from September 2008, about 70 percent of people over age 65 will require LTC services at some point with more than 40 percent needing nursing home care,” Novick said.

And it’s costly.

Novick said data from Genworth’s 2017 Cost of Care Survey found the national median cost of an assisted living facility is $3,750 per month, while a nursing home costs $8,010 per month.

“Costs are generally higher in New Jersey as is the cost for those with dementia,” Novick said. “According to the American Association for Long-term Care 2008 Sourcebook, over half of people needing nursing home care require a stay of more than 12 months with almost one-quarter staying more than three years. It is the latter portion of the population that can truly devastate a family’s finances.”

Most people don’t realize that Medicare only covers a very narrow set of LTC costs and Medicaid only covers those with very limited financial resources, Novick said.

For all but the extremely wealthy, LTCI is the best solution to offset the cost of home healthcare, assisted living, or nursing home care, he said.

The main gripe about LTCI is the cost.

Securing coverage when you are relatively young and still in good health will help keep the costs down, Novick said.

“Some people fear paying LTCI premiums for many years and dying before ever using the benefit,” he said. “I’m not sure this argument has much merit since the same could be said for auto or homeowners insurance, but everyone still gets this coverage as the financial risk of going without it is too great.”

Nonetheless, Novick said, the insurance companies came up with combination life insurance/LTCI policies, known as “hybrids,” to counter the fear of wasted premiums. With these, as long as the premium is paid for your lifetime, you or your heirs will get the full policy benefit — either as the life insurance death benefit, the LTC benefit, or a combination.

“Evaluating LTCI options can be complicated due to the number of policy variations,” Novick said. “Before you schedule an appointment with an insurance professional, I suggest that you meet with a fee-only financial planner to review your situation.”

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This post was first published in January 2018.