Long-Term Care Insurance (LTCI) can be an asset when used as a protection planning tool. As with any wealth management or retirement planning tool, it is important to weight the strengths and tradeoffs to decide if it is the right fit for you.
Strengths
Subsidizes nursing home bills
Aging is inevitable, and the gradual inability to function independently is a great concern for many people. Although the prospect of entering a nursing home is a daunting one, equally frightening is the expense of nursing home care.
Purchasing an LTCI policy can give you some peace of mind; it's comforting to know that at least some of the cost of the first few years of nursing home care will be paid for.
Moreover, because nursing homes may limit the number of beds available to Medicaid patients, you may have a wider choice of facilities if you're covered by LTCI than if you had to rely on Medicaid to pay for your care.
Allows you to protect your assets
Purchasing an LTCI policy allows you to transfer your assets to your loved ones after you enter a nursing home. The policy should cover your nursing home bills during the Medicaid ineligibility period caused by the transfer.
Without such a policy, you'd either have to transfer your assets years before entering a nursing home or else deplete some of your assets by private-paying the nursing home during the period of Medicaid ineligibility caused by your late transfer of assets.
The LTCI policy allows you to preserve your assets for your loved ones instead of spending them on nursing home bills.
Tradeoffs
May be expensive
The cost of LTCI varies depending on your age, the benefits you choose, the insurer, and other factors. When buying an LTCI policy, you must consider not only whether you can afford to pay the premium now, but also whether you'll be able to continue paying premiums in the future (when your income may be substantially decreased).
Risk is involved
Paying insurance premiums each year in the expectation that you might (at some future time) require nursing home care is a risky move. There is always the possibility that you will remain healthy and able to function independently as you grow older. The money you pay out in premiums is money that you cannot give to your children or other loved ones, so be aware of the tradeoff.
May not be necessary if you'll qualify for Medicaid
If you have modest resources, very likely, you can qualify for Medicaid by spending down some assets and/or engaging in a little Medicaid planning a few years ahead of time. That way, you'll be able to avoid paying the high cost of premiums over a number of years.
The information in this newsletter is not intended as tax, legal, investment, or retirement advice or recommendations, and it may not be relied on for the ¬purpose of ¬avoiding any ¬federal tax penalties. You are encouraged to seek advice from an independent professional ¬advisor. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the ¬purchase or sale of any security. This material was written and prepared by Broadridge Advisor Solutions. © 2019 Broadridge Investor Communication Solutions, Inc.
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