07 Nov Can a life insurance policy help with long-term care?

Q.  I’m looking at long-term care policies but they’re so expensive. I’m wondering if a long-term care rider on a life insurance policy would be more affordable – but will it give me enough coverage? How can I decide?
— Still working

A. It’s a great question, and we’re glad to see you’re thinking ahead about future care.

Long-term care (LTC) planning is a very hot topic today. That is partially driven by the fact that the conventional LTC insurance market is imploding, said Ed Gaelick, a Chartered Life Underwriter and Chartered Financial Consultant with PSI Consultants in Glen Rock.

“Many of the biggest insurance companies have either suspended the sale of their LTC insurance products, pulled out of the market entirely or limited their benefits to be much leaner; mostly a result of poor claim experience,” Gaelick said. “That means there are less 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 yours or your elder parents’ planning is to develop a strategy to protect your dignity, independence, financial security and choices should you need ongoing assistance with the basic activities of daily living.

You can’t simply rely on Medicare of Medicaid, Gaelick said.

“Medicare does not cover the cost of long-term custodial care, regardless of where it is delivered or who delivers the care,” he 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.”

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

Another option is to depend on others to care for you.

“These individuals, often family members, may only be available off work hours,” he said. “For the times you are alone, you can purchase a service where you’d have a quick emergency response if necessary.”

Instead, he said, the best option is to purchase private insurance.

A private policy would give you 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.

“Make this choice and you’ll be able to focus on the good things and have quality time with your family,” he said. “And those needing the care will have a quality of life that’s safe.”

But, Gaelick said, if the conventional LTC insurance market is so limited, what’s the solution?

A hybrid policy could be the answer.

Gaelick said the newest products combine life insurance with an LTC rider allowing the policy owner to accelerate that policy’s benefits to pay for care in the event the insured becomes benefit eligible.

“Never need the care, your policy builds cash value, which could eventually exceed your outlay and will ultimately provide a death benefit,” Gaelick said. “This could be a great solution for you.”

He said the design of the policy should consider the cost of care in your area to ensure you have enough coverage.

As for what’s affordable, Gaelick said that’s a relative term and would certainly be part of the planning and design of the right policy for you. We recommend you sit down with an insurance pro who has experience with LTC policies so you can review all your options.

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This story was originally published on Nov. 7, 2019.

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.