Show #408 Airing Sunday, 11/18/07
The good news? We're living longer. The not-so-good news? The care associated with longevity can be expensive, especially in a nursing home. What can we do to plan? Here to explain a useful insurance play is our financial quarterback who knows all the plays, Jim Lineweaver.
Question:If we've been healthy, do we really need to be concerned about long-term care?
Answer: The cost of long term care needs, including home health care, assisted living, and nursing home expenses, is something every person, couple or family should consider and understand. The costs for these facilities and care are increasing at a rate greater than the cost of living, and can reduce or wipe out a lifetime of savings.
Currently, the average cost of a nursing home in Northeast Ohio, according to the annual Met Life survey of Nursing Home & Home Health Care Costs, is over $67,000 per year for a semi-private room. Expect to spend $93,000 per year for a private room.
Question:Why don't people buy long-term care insurance?
Answer: Some can't get it because they're already sick. Many have decided it is too expensive, or are concerned that if they never need the coverage, all of the money spent on insurance premiums is a lost cost never to be recovered.
Question:That's a big one, paying for something you may never need. Is there any way to buy LTC insurance without losing the premiums?
Answer: The insurance companies recognize the concerns of the public and the growing need for long term care driven by our longer life expectancies. So they continue to develop new products to meet the growing need.
One such product is the topic for our conversation today. What if you could put a lump sum of money aside, and it would be there if you needed it during your life time for any need you had, or it would be there to help cover long term care costs? Further, if you never needed the money it would pass on to your beneficiaries tax-free. There are life insurance policies available today that do just that. It is a single premium universal life contract with added riders for convalescent care.
Question: Can you give us an example of how one of these policies works?
Answer: Let's use an example. Let's say you are healthy 65-year-old female, non-smoker. You make a single one-time payment of $50,000 into a life insurance policy.
At any time in the future, you can take all of your $50,000 with no penalties, say if an emergency arose. If you don't need the money for emergencies, and never need it for long term care costs, the policy provides for a death benefit of $71,000. $71,000 goes to your family. Tax-free.
But if you should need long term care, this policy will cover $2900 per month of nursing home costs for a period of 6 years, for a total of over $214,000. Using the nursing home coverage will reduce the death benefit, but it will never go below $7,100.
Question:Does this coverage work for everyone?
Answer: This type of coverage seems to work best for those people that are 50 to 75 years old, in good health, and who presently have no insurance coverage for long-term care. It allows you to maintain control of your money: you never give up 100% access to your money. It also always pays a benefit; either as long term care coverage, as a death benefit, or both. With traditional long-term care insurance coverage you either use it or lose it. With the coverage outlined here, you or your family will receive a benefit that best suits your needs.
Question:Can you convert existing life insurance into this LTC protection?
Answer: If you have existing life insurance policies that do not offer this added benefit, it is possible to purchase this type of coverage with the cash surrender value you have in existing policies. Or you can dovetail your investments and other assets to address this need.
Could this insurance option work for you? Call Jim Lineweaver to find out. He's offering a free analysis of your long-term care needs at the number that's next.
