How premium financing may help address long-term care needs

 

Your retirement years are supposed to be some of your very best. With the average American anticipating that he or she will leave the workforce at around 66, according to a recent Gallup survey, many of those who are financially prepared expect to be living the good life by enjoying some much needed down time, traveling the world or taking up a passion that they’ve long wanted to pursue.

For some, however, the golden years aren’t quite so golden. Due to the effects of aging, seniors may have a harder time with tasks many of us take for granted, like showering, dressing, cleaning and driving to and from various destinations. Growing older also brings the increased risk of disease, some of them debilitating.

Paying for long-term care – which goes toward the cost of prescription drugs, home or retirement community care and other needs – can be a pricey proposition. However, premium financing may be able to make medical costs in retirement more affordable.

Although most people intuitively realize that their risk for ongoing health concerns increases as they get older, few often take the appropriate precautions regarding how they’d cover the cost of assisted living. In a separate Gallup poll, just 20 percent of respondents said they’d done a great deal of thinking about how they’d pay for long-term care should they come to need it.

A financial fallback that senior citizens have, of course, is Social Security. Indeed, Gallup found that nearly 60 percent of Americans anticipate that this entitlement will be a substantial source of income during retirement years, including for high-net-worth individuals. But with fewer than three people paying into the system for every person that collects, economists and financial experts question its solvency without major reforms to keep it sustainable. The Social Security Administration announced a near 3 percent cost-of-living adjustment for beneficiaries, which went into effect Dec. 31, 2018

“Between 7 and 9 million Americans have a long-term care insurance policy in place.”

These funds can be depleted rather quickly when they go toward the cost of health care. It’s for this reason that long-term care insurance can make sense by serving as a safety net. According to the most recent estimates from the American Association for Long-Term Care Insurance, between 7 and 9 million Americans have a long-term care insurance policy in place. There were 295,000 claimants in 2017, whose claims valued $9.2 billion. LTC coverage fills in the gaps for services that Medicare doesn’t pay for, such as assisted living, nursing home stays and personal homecare professionals, among other health-related treatments. According to AARP, the likelihood 65-and-older Americans will need to use the proceeds from LTC insurance is about 50-50.

Long-term nursing home care can run north of $100,000 annually
Most LTC insurance claims – 52 percent – are first submitted when policyholders live on a full-time basis in the confines of their home, the AALTCI reported. But when health gets to a point that it requires more intensive, round-the-clock care, seniors may need to enter an assisted living or nursing home facility. The costs can add up quickly, with a one-year stay in a private facility totaling a median of roughly $100,000, based on estimates from the American Council of Life Insurers. The dollar amount is only expected to rise moving forward, perhaps more than doubling by 2048, the ACLI forecasts, to $240,000.

LTC coverage serves as an effective line of defense from having to dip into emergency or retirement savings. The only problem with it, however, is there’s no guarantee policyholders will wind up using the benefits, unlike life insurance. On average, the annual premium among LTC insurance companies in 2018 was $3,000 for a couple at 55 years of age, $2,965 for a single woman and $1,870 for a single man. That’s a lot of money to spend out of pocket, especially since fewer than a quarter of Americans pay $50,000 for long-term care needs in their lifetime, AARP reported.

It may therefore behoove you to consider combining life insurance with long-term care coverage. Recommended by the ACLI, these hybrid policies serve dual purposes, with the proceeds going toward the cost of ongoing elderly care when needed and the remainder – or all of it – left for beneficiaries to use.

Nerdwallet noted that paying a lump sum for combination policies can be particularly advantageous because by doing so you don’t have to worry about premiums spiking all of a sudden.

Even for the weathy, however, a lump sum payment for combination LTC and life insurance can be a tough ask. Whether you’re a business owner or fully retired, you may have assets tied up in other capacities that prevent you from coming up with an upfront payment. Life insurance premium financing may be the answer. Through the power of leverage, you can get a high value life insurance policy at a fraction of what the cost would be to pay fully out of pocket.

Picture of brain on puzzle board. Alzheimer’s disease is a puzzle that doctors and researchers are desperately trying to solve.

Alzheimer’s a costly disease – in more ways than one
Even fairly routine long-term care services – like bathing, running errands and cooking – can come at a considerable cost to policyholders, never mind for people who pay their own way. But the expense can be even greater for debilitating conditions like Alzheimer’s disease.

Although there have been breakthroughs, there’s no known cure to Alzheimer’s, a form of dementia that primarily affects both short-term and long-term memory and changes in behavior. Symptoms worsen over time, and while deadly, patients may live with the neurological disease for several years. According to the Cure Alzheimer’s Fund, the total cost of treating Alzheimer’s in 2017 was $259 billion, with Medicare and Medicaid covering a fraction of that. Roughly $84 billion of the overall amount was paid for out of pocket.

What’s more, individuals with Alzheimer’s and other related dementias have two times the number of hospital visits compared to people the same age but without the disease, data from the Cure Alzheimer’s Fund found.

Everyone hopes for the best as they get older, knowing that their health could deteriorate, despite doing their level best to exercise and eat right. Life insurance premium financing can provide you with the financial protection you and your family need for worst-case scenarios at highly competitive rates.

Here are 10 more good reasons to choose Leveraged Planning® Solutions through Global Financial Distributors.