Boomer Perspective: Long Term Care Insurance – The ‘Use it’ or ‘Lose it’ Insurance

long-term-careAs a young boomer on the verge of becoming an empty-nester, I have begun to focus my attention and efforts towards aging. I am not focused on growing old but I am concerned who will take care of me in my elderly years. After caring for myself for over 30 years, the possibility of being vulnerable scares me.

Growing up I never really thought about who cared for my elderly relatives. I always thought someone in the family would care for them. My grandmother cared for my grandfather. My mother cared for my ailing father and my husband’s brothers are currently caring for his parents. Finally, when my grandmother became ill my brother was there to care for her. Who will care for my husband and me? I would like to think it will be my millennial sons. However, they are young and currently trying to make a life for themselves. My husband and I are no longer comfortable with our children being our primary option.

Coincidentally, my husband met an elderly man who was recently retired and had developed some health issues. He was complaining that he was too sick to care for his ailing wife and was not sure what they were going to do. They had retired to a location far from family and friends and had a limited support base. They were questioning would long term care insurance be the answer? Did they wait too long that it is now too expensive? Would they be rejected due to pre-existing conditions? Did they gamble and lose the long term care game of “do I need this type of insurance or not”? It made me think about long term care as a possibility for my husband and me.

Long term care insurance is the “use it or lose it” type of insurance. It is a very expensive insurance purchase that many people feel they may never need. I believe that the need does exist. Per a government study 7 out of 10 people will need long term care insurance in their lifetime. Women on average will need 3.7 years of care and men will need on average 2.2 years of care (longtermcare.gov). However, LTC policies have dropped 65% from 2000 to 2010. This drop in insured lives may be due in part to the rising costs. LTC insurance has increased on average by 8.6% over last year per the 2015 Long Term Care Insurance Price Index.

Based on our research, my husband and I are exploring all of the options below.

Long Term Care Insurance Options:

  1. Traditional long term care – costly and has a high rejection rate due to pre-existing health conditions
  2. Life insurance with a LTC rider – this option lets you combine Whole, Indexed or Universal life policy with the option to get 2-5% of the death benefit for in-home or nursing home costs.
  3. Short Term Care Insurance – similar to the traditional LTC insurance but for a shorter period of coverage usually less than 12 months. This type of insurance is also called recovery insurance.
  4. Fixed Annuity with LTC access – allows you to invest in an annuity and use the rider to set your LTC benefits. With this option there is no health underwriting.
  5. Self-insuring against LTC costs – Works well for the wealthy but low income consumers will mostly likely seek the help of Medicaid to pick up these expenses. The middle income should explore independent group insurance through their jobs.

As part of our insurance journey, I identified The Top Ten Long Term Care Insurance companies rated by Consumer Affairs:

Bankers Life
John Hancock
ACSIA Partners
GuideOne Insurance
Mutual of Omaha

My retirement dream has always been to move in with my son and his family surrounded by my grandchildren. I don’t want to be a burden as I age nor do I want to rely solely on my dream. I know that life can change in an instant. As a result, we are exploring traditional LTC insurance and a life insurance policy with a LTC rider.

After all our own insurance research, I have even told my millennial sons that they should be thinking about insurance at their age. No matter what age you are all of us need to create our own insurance safety net should the unexpected happens.

Stay tuned to see how life happens and plans can be derailed.