05 Oct Can life insurance help pay for long-term care?

Q. I don’t really want to pay for long-term care insurance, but I’ve heard there are life insurance policies that offer some coverage. Can you explain how they work?
— Planning

A. Long-term care planning is a very hot topic today.

The reason? Partly because the conventional long-term care insurance market is imploding.

“Many of the biggest insurance companies have either suspended the sale of their long-term care insurance products, pulled out of the market entirely or limited their benefits to be much leaner — mostly a result of poor claim experience,” said Ed Gaelick, a Chartered Life Underwriter and Chartered Financial Consultant with PSI Consultants in Glen Rock.

That means there are fewer choices to safeguard your assets and protect the quality of life for you and your family, he said.

One of the most important parts of long-term planning is developing a strategy to protect your dignity, independence, financial security and choices should you need ongoing assistance with the basic activities of daily living.

Think Medicare and/or Medicaid will pay for care? Think again.

“Medicare does not cover the cost of long term custodial care, regardless of where it is delivered or who delivers the care,” Gaelick said. “To be eligible for Medicaid, recipients must first `spend down’ their assets to a level that qualifies them for benefits.”

“It is essentially a process of voluntary impoverishment,” he said.

One planning option is to pay for services yourself. But the rapidly escalating cost for all levels of care can quickly drain what you have worked so hard to accumulate, he said.

Another is to depend on others to care for you. These individuals, often family members, may only be available off work hours. For the times you are alone, you can purchase a service where you’d have a quick emergency response if necessary, he said.

The best option, Gaelick said, is to purchase private insurance.

“This way you’d have the resources to provide the proper level of care should professional care be needed, whether it be home health care, assisted living or skilled nursing,” he said. “Make this choice and you’ll be able to focus on the good things and have quality time with your family. And those needing the care will have a quality of life that’s safe.”

If the conventional long-term care insurance market is so limited or you are not interested, or if you can’t afford it, a hybrid policy may be the solution.

“The newest products combine life insurance with a long-term care ‘rider,’ allowing the policy owner to use that policy’s benefits to pay for care in the event the insured becomes benefit eligible,” he said. “Never need the care, your policy builds cash value, which could eventually exceed your outlay and will ultimately provide a death benefit.”

“This could be a great solution for you,” he said.

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This story was originally published on Oct. 5, 2021.

NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.