Financing Without Insurance

How To Finance the Costs of Long Term Care When You Can't Obtain Long Term Care Insurance

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Self-Insurance | Why LTC insurance | Reality of Saving

Before you write out a check, you have some more thinking to do. Long Term Care insurance is a great hedge against the high costs of elderly care, but it isn't for everyone. And even if it is right for you, you have to pick your policy carefully (see FAQ page).

If, after checking it out you find that you can't qualify for health reasons or for other reasons Long Term Care insurance is not a suitable choice, there are other options...

If you own Life Insurance, you should check to see whether you are allowed to use a portion of the death benefit for medical or Long Term Care while you are alive. An even more attractive benefit may be selling your life insurance policy by using a Viatical Settlement.

If you have alot of equity in your home, you could consider a Reverse Equity Mortgage. This is basically a loan from the bank that is based on the value of your home. Generally, the loan does not have to be repaid as long as you live in the home. If you sell your house or move away, then the mortgage must be repaid.

Is Self-insuring for Long Term Care a Practical Option?

Another estate protection strategy is to use your savings or to self-pay for Long Term Care. The key here is to make sure you can put enough aside to cover whatever your Long Term Care will cost.

Of course, a financial expert would point out that saving this amount of money each month will cost at least as much as, and probably more than, buying Long Term Care insurance. But this may be an option for those who cannot buy Long Term Care insurance, such as those who have pre-existing medical conditions.

If you have a network of close friends and relatives who might consider pitching in to help care for you, that might provide you with a safety net as well. It is always a good idea to talk with these people before you buy Long Term Care insurance because, if they are willing to help, it could reduce the amount of insurance you have to buy.

The state or region where you receive long term health care services is another factor when deciding how much coverage you should carry. Costs in the Northeast and on the West Coast are often double the rates in the South or Midwest.

But there are other options to this as well... As with any major decision of this sort, which will affect both your financial situation and your well-being, it is best to consult with your family, financial advisors and your attorney before you make any final decisions.

Why Long Term Care insurance makes better sense than self-insuring.

The risk of someday needing some form of care at home or in a long term care facility is far greater than most people realize. Health care experts point out that the risk of having to pay a substantial portion of your assets and income for long term care - not covered by Medicare or Medicare supplement policies - is far greater than the risk of a serious auto accident or serious damage to your home.

Americans routinely own insurance coverage against the risk of an auto accident or a fire in their home, but often ignore the more serious risk of impoverishment due to a catastrophic illness.

When I talk with prospective clients about the subject of long term care insurance, some will say "I don't have to worry about it. If I need to, I can pay for it with my retirement income and savings". When they discover the real cost of care today, and consider the anticipated cost of such care in the future, they begin to reconsider the wisdom of 'self-insuring' for this very substantial risk.

Individuals who suddenly need care, whether due to a fall, a stroke, Alzheimer's disease or other chronic illness, discover to their dismay that the cost of this care in Massachusetts ranges from $45,000 to $75,000 annually. That's in today's dollars!

Ten years from now, based on a conservative health care inflation factor of 5%, these costs will have risen to an average of $270 per day - or $98,500 per year. In twenty years, at the same rate of inflation, the cost will average $420 per day - or more than $150,000 per year.

The Reality of Saving Now for Future Long Term Care Costs

If you decide at age 60 to set up a savings plan in order to be prepared for long term care needs later in life, consider this scenario. You can set aside $2,000 per year in an account that pays an interest rate of 10%. Your account could accumulate $25,000 in ten years. With continued $2,000 deposits and interest compounding, your long term care savings account could grow to as much as $60,000 in twenty years.

If you stay healthy for ten years, and then at age 70 you need long term care, your savings account will barely cover three months of the cost at that time!

If you stay healthy for twenty years, and at age 80 you then find yourself with monthly bills for long term care, the $60,000 you've saved will likely be exhausted in five months time.

How, then, can anyone possibly save enough money to obtain the kind of quality care they'll want when they need it in the future? Consider the example cited above. The same $2,000 annual savings invested in a well-designed long term care insurance policy, at age 60, creates an instant pool of money of more than $270,000.

With no increase in the annual premium, the 5% compounded inflation factor built into the policy will grow to a long term care savings account of nearly $500,000. In twenty years, the savings account created by your long term care insurance policy at age 60 will have grown to more than $750,000.

If you are healthy enough to qualify for long term care insurance, there is simply no more practical or effective investment you can make today, to pay for the care you may well need in the future.

In addition to the security and peace of mind that comes with knowing that you are financially prepared comes the satisfaction of knowing that you'll be able to choose the kind and quality of care that suits your personal preferences - and retain as much of your independence as possible.

And you'll never have to worry about placing the burden of long term care costs on your family

Informed Eldercare Decisions, Inc., provides the following services:

• Health, social & functional assessments to determine the services best suited for each individual.
• Care Planning and care management: arranging & monitoring home & community care, assisted living, nursing care facilities & other services.
• Support for family caregivers who live far from their parents or siblings.
• Advisory services to guardians and conservators.
• Counseling and assistance with methods of financing the high cost of long term care including: Long Term Care Insurance, Reverse Mortgages, Life Settlements and other long-term care financing strategies.

Informed Eldercare Decisions, Inc. is a private company dedicated to helping people make the best choices for long term elder care of their relatives. We are Experts in Long Term Care insurance and Elder Care planning.

450 Washington Street, Suite 108, Dedham, MA 02026-0428, USA
Phone 781-461-9637
Fax 781-461-9638