A couple with whom I had an advisor/client relationship some years back, we’ll call them Bill 67 and Nancy 65, had a situation where Nancy fell ill and became severely incapacitated. It became a very difficult situation for the family. For some years in our three yearly meetings, I had emphasized the need to make certain there was some sort of skilled care policy in place. There were certainly enough assets to account for the cost of a policy. Even one covering two lives. They continued to resist, believing they could self-fund out of the assets they were diligently saving, and which I was growing for them. Upon Nancy’s incapacitation and stabilization, Bill decided he would provide care in the home, supplemented by some in-home visiting nursing care. This proved difficult for him as he had to stop working in order to do this. He was within 1 year of retirement. For close to half the year he provided 24-hour care, along with the help of one of their children who still lived close by. This in addition to 10-hours per week of nursing assistance. Shortly thereafter, realizing the care he was providing was too much for him to handle, Nancy was transferred to a facility designed to provide for the specific care she required. The cost for her care over the next year was an average of $400 a day, ultimately costing over $350,000 in assets they had planned to use for retirement. Nancy finally became too weak to overcome the follow-on to the initial illness, and passed away. Bill had to return to the workforce for another 3 years in an attempt to recover some of the assets that paid for her care. Using this case as an example, according to New York Life in 2018, the average costs of care are as follows: Private Medicare – certified long-term nursing room is $103,660* Home Care – The average home care costs $48,402 a year for 40 hours of help per week* Assisted Living Care – A year in a 1-bedroom assisted living care facility averages $56,340 per year* Long-Term Care has become a very major topic of discussion over the past 20 years, driving the popularity of long-term care insurance policies. Nonetheless, Long-Term Care insurance is still somewhat misunderstood and not taken as seriously as it should by Americans as a true planning tool for any point in life. Long-Term Care (LTC), or Traditional LTC, was originally conceived of as an insurance policy that works largely like auto and homeowner insurance. With regularly paid premiums, a policy is kept in force and can feature a number of provisions such as: Inflation protection Daily benefit minimums and maximums (the more expensive the care facility, the higher the premium) And even a choice between in-home care or skilled nursing facility Another feature is this type of policy tends to work best when it is purchased earlier than retirement age. Due to the increased actuarial chance of death as we age, the costs of these policies tend to increase dramatically as we get older. Which leads us to another type of LTC policy, which can be purchased much later in life, without the attendant concern about the increasing cost: the Hybrid LTC or Single Premium LTC. The name by definition suggests that the policy is purchased through a one-time premium. These policies also allow for the same provisions as a Traditional LTC policy. Inflation riders to keep the value of the daily care cost rising with the cost of this care The ability to choose the amount of daily cost one would like to pay for, which, allows flexibility to self-insure a certain amount if the assets are available to cover this, thus increasing the number of years this policy might cover the policy owner in the event of incapacitation And the ability to choose in-home care or skilled facility The Hybrid LTC policy, however, also does are the following: Allow for tax free growth of the premium and a full return of premium in the event the policy owner wishes. While not advisable as an owner activated option, this is typically a policy guarantee. Flexible funding options, such as an IRS code 1035 exchange of other qualified insurance policies or even the use qualified assets Further, if the policy is never used and the owner(s) passes, some policies refund the estate the original premium, plus any growth of the funds. As a financial planning tool, either of these LTC policy choices gives policy owners the ability to: Keep or allay the high costs of long-term care from depleting their assets. Individuals without this kind of policy can be in danger of losing their homes and assets in order to pay for this very expensive care. Do not assume Medicare will cover these costs. Medicare does not. Understand that LTC is a choice that makes sense as an add-on policy. Want to learn more? Contact me. Or, schedule a free consultation. * New York Life Cost of Care Survey, 2018