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Long Term Care - I’m Not Going to Need It

Dave Verbeke-Financial Advisor

“I am not going to need it.” “It costs too much.” “My kids will take care of me.” “I don’t want to buy something I may not need.” These are many of the reasons that I commonly hear when it comes to long term care (LTC) planning. Here’s an important fact - 69% of people turning 65 will need some type of long term care in their lifetime. With those odds, it makes sense to have some type of plan to deal with the issue before it becomes a crisis. Failing to plan is a plan to fail - just ask anyone who has lived through this with a loved one.


The average annual cost for a 60-year-old for a traditional LTC policy is about $3,500. This type of coverage will give you an estimated cash pool of $500,000 to $600,000 to pay for your care costs. Coverage can include home based care assistance, home modifications or assisted living. With a traditional policy you will pay premiums until you qualify for care and submit a claim. Not a bad investment when the average assisted living cost is $45,000 a year!


Another type of coverage is a hybrid life insurance/long term care policy. For that same $500,000 of long term care coverage you might have a $100,000 of life insurance. This type of policy can be paid for over a 10 year time frame. Another option is to exchange an existing life insurance contract with cash value to the new policy with LTC coverage. Using an exchange can be particularly attractive if your need for life insurance has been reduced because your kids are now adults or you’ve paid off your mortgage.


There are a number of incentives to help you pay for your premium costs. The State of Minnesota offers tax credits for premium payments. Alternatively, money in a health savings account can also be used to pay premiums. Both options have a yearly maximum limit.


Contact your advisor for help in creating your long term health care plan.

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