My Grandma Eloise was one of the most spirited and energetic people I’ve ever known. She was fully herself all throughout her 9th decade – still helping my own mother and her other children regularly, in church every Sunday, cleaning her own home, driving. Unfortunately, in her early 90s she experienced a steep and rapid decline. As a mother of 6 and grandmother of 10, it’s easy to assume there were plenty of resources available for her care.
My own family was extremely fortunate. My youngest aunt is a hospice nurse, and her daughter was able to quickly learn what was needed under her mother’s mentorship. She moved into my grandmother’s home and lived by her side, providing loving care and the ability for my grandmother to pass on with dignity in the comfort of her own home. Many families are not so fortunate, and the caregiving process can be as devastating as death. Even in our scenario, the family disagreed as to whether in-home care was really better than skilled nursing care in a facility. The question of compensation for caregiving were extremely contentious, and the emotional toll on the family was previously unimaginable.
For so many women, myself included, the thought of becoming a burden on my children or grandchildren is terrifying. Meanwhile, we know that we may be responsible for the care of our own parents in the not so distant future. It seems inevitable, the circle of life. While this may be true, there are certainly considerations, plans we can make in advance to assist and equip our families to deal with the circumstances as best they can.
Long term care insurance is available to provide a financial safety net in these situations. However, long-term care insurance may come with costly premiums in exchange for the flexibility and coverage you need. And the premiums for these products have risen quite substantially over the last few years. Even with long-term care insurance, you may still find yourself paying out of pocket for certain elements of required care or realize that in-home care is not provided for under the terms of your policy.
Who should purchase Long-term care insurance?
Essentially, I think we all break down into three categories for asking this question.
Group 1 – I will spend all of my assets for my care, and subsequently be covered by Medicaid.
Group 2 – I can self-insure, and my assets are sufficient that my care will be provided for at a comfortable level.
Group 3 – Everyone else.
If you or your loved ones are in Group 1, while long-term care insurance may not be for you, you should be aware of what will be covered by Medicare, your Medigap/supplemental policy, any Veterans Affairs (VA) benefits if applicable, and eventually, by Medicaid. You may be eligible for more than you know. Genworth provides a helpful summary of Medicare and Medicaid coverage in this article. If you are covered by VA health care,
the Department of Veterans Affairs provides detail for available benefits here.
If you’re in Groups 2 or 3, there are a few things to consider. First, I always advise my clients to think in advance about the process and who is available both to provide care and to make decisions. Do you know, beyond doubt, that your children (or other decision makers) will make their choices for the benefit of your care and comfort versus maximizing their inheritance? Would you rather they not be in that position? Secondly, do you have an idea of how much long-term care will cost and how you might pay for it? Genworth’s Cost of Care Tool is a great resource to determine average costs of care in your area. If these costs seem too burdensome, long-term care might be for you.
In general, if you are under the age of 50, we don’t recommend you purchase long-term care insurance (at least not yet) because the premiums are paid for the remainder of your life, up until the time care is needed. Though annual costs rise as you age (for example, the average premium for a 55-year-old woman is $2,700/year vs $3,050/year at age 60)* the all-in costs might still be lower by starting the policy later in life. And since women are more likely to receive long-term care than men (64% of long-term care insurance claims paid were for women)* the premiums are higher for women. If you have a concern with long-term care is depleting assets that you’d hoped to leave to your family, you may consider a “hybrid” policy, which combines features of life insurance with long term care, as an estate preservation tool. There are many types of policy options available to suit different personal situations.
Before making any decisions about insurance, the most important first step is making your wishes known.
Your family should know if it is your wish to remain in your home for as long as is reasonable. If you plan to live with a family member, or have a family member provide your care, are they aware of your plan, and is it realistic? It may well be that your daughter in her mid-50’s expects to be fully retired by the time you need care – but in reality, she is still working a full-time job and supporting her kids who are in their 20’s and still in the nest. Do you have a backup plan? Will another child be offended that you didn’t ask him or her for care? While these conversations are almost certainly uncomfortable, they can greatly help in managing expectations and hopefully, minimizing conflicts amongst children and grandchildren.
The decisions around long-term care are complex and emotional and shouldn’t be made alone. Your financial advisor is a wonderful resource for helping you to think through the cost-benefit analysis of long-term care insurance, the particular features that are most important for you, or whether life insurance might be a better route. They can help you to think through all of the pieces, document your wishes, and equip you to have these important conversations with your family.
My grandmother when she was 20 years old.
My grandmother (far left) at my wedding day.