The reasons people put off creating their long term care plan are numerous and personal, however one of the reasons that people often give is cost. There’s a belief among consumers that all long term care insurance is out of reach.
Long term care insurance (LTCi) has been a part of Cassandra Watson’s life for as long as she can remember, As the daughter of a long term care specialist, Cassandra has LTC planning in her DNA. She shared with us a story about a couple who were looking for an affordable plan that would provide them with the benefits they needed most at a price point they could afford as they near retirement.
Client Motivation
In this case, Liz, age 55, already had LTCi from 2003. At the time, her husband, Brian, now 56, refused to consider it. Recently, they were updating their wills and their attorney recommended they look into long term care insurance. Now that they have grandkids and their retirement is on the horizon, Brian agreed, and Liz also considered changing her plan.
Planning Needs
They wanted to cover their kids who now have families and obligations of their own. They were very pragmatic, planning on caring for one another at home as long as both are still living. They were looking for resources to support one another should they need some skilled care at home, or if one needs assisted living while the other is still at home, they want some choice and flexibility. Liz always felt this was a prudent planning tool, Brian was new to it.
Financial Background
They expect to have $72,000 per year in retirement income after years of Liz working as a programmer and Brian in construction. This amount does not include social security. They also have around $2 million in rental properties, and about $200,000 in other savings and retirement accounts. They plan to leave the real estate to their kids.
With the majority of their assets in real estate, a cash flow problem like long-term care would present a huge issue. If you have to begin selling properties to pay for LTC, you have all the headache, time, and effort that goes with that, plus you’re decreasing the income you bring in the following year because you’ve lost that rental property.
Solution
I recommended a no-nonsense/no-frills approach. Their big issue isn’t that they need a policy to fund long-term care, they need a policy to fix the cash-flow problem. They wanted just enough to give their income a soft cushion and prevent them from having to sell off properties to pay for the care.
Brian wanted just enough monthly benefit to account for the average cost of home care or assisted living facility in the area, adjusting for inflation, with the opportunity to get more inflation protection if they needed it. For Liz, we reviewed her existing policy and recommended only a tiny policy to add inflation protection—the benefit itself is good today, but her existing coverage didn’t have any inflation adjustment. At 55 and 56 that’s crucial.
We completed everything online – they filled out the electronic application together using a screen share. Then, they completed their digital signatures, and we were off to underwriting.
It’s so important to speak with an experienced specialist. A long-term care plan should be customized to your health and financial picture. And it’s possible to create an affordable plan that will provide some coverage – and that’s way better than no plan at all.
