Why Should You Consider LTCI Now?


I have been in insurance sales for 25 years.  Sometimes, I cannot help myself.  I have to say something “salesy” or my head will explode.

I hope that you will read this post, in spite of the “salesy” headline.  Whether you buy  Long Term Care insurance (LTCI) from The Insurance Barn or a local insurance agent is immaterial.  The important thing is that you buy LTCI now if you think that you will need it in the future.

IS LTCI FOR EVERYBODY

Many, less than professional, insurance agents will scream over what I am about to say.  LTCI is not right for everybody.

If you will be able to save more than $350,000 individually, $700,000 for couples, you probably have enough money to pay for your Long Term Care expenses.  LTCI would be a nice luxury for you to have but not a necessity.

If you will have less than $30,000 of assets when you retire, you probably will probably qualify for Medicaid.   As long as you are content to follow Medicaid’s rules, there is no reason for you to spend money on insurance premiums for which you could find a better use.

The average American will need to spend over $240,000 on health care during retirement.  Unfortunately, the average American has just under $70,000 in retirement savings on the day they retire.

HOW WILL THE BILLS GET PAID?

The most popular source of Long Term Care is from friends and family.  Unfortunately, spouses die and children move away.  There is no guarantee that family will be around when, and if, you need Long Term Care.

I have experienced this.  My 80-year-old mother suffered a stroke.  She refuses to move from Indiana to my home in Texas.  The closest family member to her, my sister, lives 70 miles away.  Fortunately, her stroke did not do much damage.  She is able to continue to function as an independent adult.  Her only limitation is that she is no longer able to operate her car.  She must rely on her friends from church to take her to get her groceries.  She wears a “panic button” on a chain around her neck to call 911 in the event of another stroke or other emergency.

Not all stroke victims are as lucky as mom.  It all depends on what area of the brain is damaged by a stroke.

The difference between $240,000 and $70,000 is huge.  It begs the question, “How will Long Term Care bills be paid?”

If you require Long Term Care during retirement, there are only a handful of ways for you to pay for it.

  1. ENTITLEMENTS – Government programs like Medicare and Medicaid are limited.   Medicare will only help with up to 100 days of Long Term Care in a skilled nursing home following a hospitalization.  It requires that there be a “medical necessity” for Long Term Care.  It will not pay anything if the reason for the nursing home is custodial or respite care.  Medicaid will help with Long Term Care bills but you must first “spend down” your assets to qualify for the state/federal program.  (This is why I say that people who retire with less than $30,000 in retirement savings do not need LTCI.)
  2. SAVINGS –  Most people who need Long Term Care do not need the extreme level of care that is provided in a skilled nursing home.  Only 15% of people who need Long Term Care end up in a nursing home.  The rest obtain their care either at home or an Assisted Living facility.  Medicaid does not pay anything for an Assisted Living apartment.  You will have to pay for that yourself.  Medicaid will help you hire a Home Health Aide if you need one.  However, Medicaid requires you to spend your savings down to their qualifying levels before they will help you.  (This is why I say that people who retire with more than $ 700,000 in retirement savings do not need LTCI.)
  3. PRIVATE INSURANCE – There is nothing magical about private insurance.  All it does is provide another option.  Private insurance is not able to guarantee that you will never get sick or injured.  It guarantees that if you do need Long Term Care, money will be available to help you pay for it.  You would not have the added stress of qualifying for a government entitlement.  (This is why I recommend LTCI for people who plan to retire with $30,000 – $700,000 in retirement savings.)

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