Evaluating long-term care is an important part of every estate plan, but with recent changes in the long-term care insurance industry, what is the best course of action?
As you age, preparing for your long-term care needs is an essential part of your financial plan. Traditionally, long-term care (LTC) insurance policies have been the best way to plan for these future healthcare expenses. However, over the last 20 years, the LTC insurance market has changed significantly. According to the National Association of Insurance Commissioners, the number of insurers offering coverage has decreased from approximately 100 to about a dozen, despite the number of people covered by a policy more than doubling in the past decade. On top of that, new policy sales have dropped, while premium rates have increased significantly.
As a result, LTC insurance has become largely cost-prohibitive for most consumers, which has caused the industry to shift as people look to alternatives. One such alternative that is quickly gaining popularity is a permanent life insurance policy with a long-term care rider. This is sometimes referred to as a hybrid policy. This type of policy can be used as a death benefit or to pay for long-term care, depending on the outcome for the insured. Some policies even allow the ability to surrender and receive a paid-back portion of your premium.
Another option to consider is to self-insure using income from your assets to cover long-term care costs. This is, of course, depends on whether or not you have enough liquid assets to cover the costs. Rough estimations show that a portfolio of $3 to $5 million would be sufficient to cover care for a couple in their 60s. Your advisor can help you determine a more accurate number for you.
Most experts recommend evaluating your long-term care planning options beginning in your early 50s. This is especially more important if you or your spouse has a history of family health issues. For more complex situations, we may advise seeking advice from an elder law attorney. These professionals, who also assist in general estate planning, are particularly skilled in long-term care planning strategies. If you have yet to start your long-term care planning, ask your DCM advisor to meet with you to review your current financial plan.
This report was prepared by Donaldson Capital Management, LLC, a federally registered investment adviser under the Investment Advisers Act of 1940. Registration as an investment adviser does not imply a certain level of skill or training. The oral and written communications of an adviser provide you with information about which you determine to hire or retain an adviser. Information in these materials are from sources Donaldson Capital Management, LLC deems reliable, however we do not attest to their accuracy.
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