“Age Wave” has found that people underestimate how long they will live. They also underestimate their need for Long Term Care (LTC). That is, 37% think they’ll need it, but 70% actually do and only 8% have any coverage.
The issues with typical LTC policies are: They are expensive, premiums continue to rise, areas of coverage are being dropped and some companies have just cancelled policies.
The two types of coverage are:
(1) Use it or lose it. You pay a premium for a specific amount of coverage. If you never use it the money is just gone. Premium cost for a healthy 59 year old is $6,000 per year to develop a pool of $328,000 with a maximum of $300/day.
(2) A Hybrid policy. You pay an initial lump sum for a certain amount of care later. No further annual payments. You can get your premium money back after a time, or, your heirs can get two times your principle amount if you die before using the insurance, or, you could get up to 5 times the principle payment in LTC benefits.
Keep in mind for your planning… the median cost for a private room in New York City is $170,000 per year. In Florida, the median is $90,000 per year.
The best time to start planning and to take action is in your 40’s and 50’s.
Another family approach is, say, you are in a nursing home that costs $200,000 per year for 20 years, then, you will spend $4 million of your own money. Many parents will buy a $4 million life policy on themselves, then, upon their death the family gets the $4 million, tax free from the insurance. Since their estate has been dwindled by the $4 million of LTC costs.
Our favorite approach is a multi approach hybrid policy. The primary purpose is to be used to generate TAX FREE retirement income. It can also be used to pay for LTC, should it arise, and lastly, it can pay family members a tax free death benefit.
So, if you are in your 40’s, 50’s or 60’s contact us on the best option for yourself.