Plan Today for Future Long-Term Care Costs
Courtesy of Tom Ploskanka C.P.A.
According to the U.S. Department of Health and Human Services, nearly 70 percent of people turning age 65 will require long-term care, such as assistance with basic personal activities during their lifetimes. With costs of this care ranging from $6,000 to $10,000 a month or more, planning to address that risk is a smart move.
One solution is long-term care insurance. A policy can protect your estate against the impact of extended medical or rehabilitation services. However, the cost of insurance may have you considering “taking your chances” and letting Medicare or Medicaid step in once your resources are depleted. But what happens when either you or your spouse requires nursing home care while the other is healthy and living independently?
Purchasing long-term care insurance has drawbacks. For one, if you never need long-term care, the premiums you paid are wasted. You may be able to mitigate this somewhat by choosing a flexible policy with life insurance benefits.
Another drawback: You face the risk that the insurance company you select will go out of business. Choosing an insurer that is highly rated for financial strength can ease your mind.
On the plus side, long-term care insurance offers tax benefits. When you itemize, all or part of the premium for qualified plans are deductible as health care costs. Depending on the type of policy you buy, benefits paid are generally not considered taxable income.
If you think long-term care insurance is right for you, remember that coverage costs less when you’re younger. Premiums are based on your age and health, and tend to increase past age 60. Another cost-saving move to consider is a “shared-care” policy with a combined pool of coverage that you and your spouse share.
Contact our office before making the final decision to buy long-term care insurance. We’ll help you do a cost-benefit analysis.
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Insurance companies are highly regulated and have very strict requirements for setting aside sufficient assets to pay all of their future claims. Insurance companies have much tougher reserve requirements than banks.
When AIG needed a bailout, it was NOT the AIG insurance companies that went “belly up.” It was the non-regulated part of the company that sold non-regulated credit default swaps that went “belly up.” AIG ended up selling many of its insurance companies (which were all very profitable) in order to pay back to the government all of the “bailout money” plus a profit of about $22 billion.
http://www.cnbc.com/id/100397698
If an insurance company (regardless of what products it sells) goes “belly up,” then the state guaranty associations kick in to help pay the claims.
https://www.nolhga.com/aboutnolhga/main.cfm/location/whatisnolhga
Long-term care insurance has been around for over 40 years. There has been only one insurance company selling long-term care insurance that has gone “belly up” and its claims are being paid by the guaranty association. It was a very small insurance company and it always had very low financial ratings.
Many of the largest, most respected, insurance companies in the country sell long-term care insurance including State Farm, Mutual of Omaha, New York Life, Northwestern Mutual, Massachusetts Mutual, John Hancock, Thrivent Financial, and Transamerica–all of them are companies that have been around for 100 years (or more).
And this year nearly 300,000 people will make claims on their long-term care insurance policies and receive approximately $10 Billion in benefits.
Scott A. Olson
LTCShop