Top 5 Reasons to NOT get Long-Term Care Insurance

I think I've heard just about every reason there is why NOT to secure Long-Term Care insurance. Here are the Top 5 Reasons:

#1 - Long-Term Care insurance is too expensive.

Here's a math problem for you. If on January 1st every year I paid you $10 for the promise that you'd pay me $10 every month for the next 5 years if I ever needed my money, would that be a bad deal? Too expensive? What would you say if I told you that even with the legacy Long-Term Care plans in Arkansas (and most companies offering these have left the arena) that is roughly what you're looking at? Just this morning I presented a traditional Long-Term Care illustration to a 60 year-old. His annual premium was roughly 1/12th of the monthly benefit he'd receive when he qualifies for care. That's a 12 fold return on his premium!

To be sure, the annual premiums for Long-Term Care are an investment. They are an investment in you and your family's protection should you require assistance at some point during your life. But, it's a sound and prudent investment with that kind of return. And that's not even considering the value of a hybrid Life/LTC plans that include return of premium vesting and death benefits!

#2 - If I never need care, the money I paid through my premiums is lost.

That used to be true and could still be true, depending on the plan chosen. That's where having an agent like me who specializes in Long-Term Care is important in order to avoid that scenario.

With today's hybrid Life/LTC insurance policies, the "use it or lose it" proposition is gone. You can literally get back all of your premium (once vested) or receive the entire death benefit if no services are required. So, nope, your premiums are not lost if you select the best hybrid Life/LTC plan (and I'd be happy to share information on that plan with you!).

Many years ago with my home care agency, I met a couple who my agency was starting services with in a few days. They had an old LTC policy and it had a 90-day elimination period. That's fairly typical and it provides a length of time "deductible" during which time they would pay for services out-of-pocket. The wife was really upset and threatened to call the insurance company to cancel the policy. I had to reassure her that she had good coverage, so with my pen and legal pad, I shared the benefits she was about to receive through her policy. In their particular case, they recouped 100% of the premiums they had paid over the previous 7 years in less than 6 months. If - as we all expected - this extended care situation lasted longer, she would be making money! In the end, she kept the policy in and had a huge return on their investment.

#3 - I'll do some planning and Medicaid will pick up the tab.

There is definitely the option of artificially impoverishing yourself so you are eligible to go on the dole and have Medicaid pay for your extended care. I make light of it (and truly intend no offense) because in truth, that is what "Medicaid planning" does. It repositions assets or plans to pay penalties in order to become impoverished and give the taxpayers the financial burden of your long-term care. It's perfectly legal and there are scores of attorneys whose primary business is ensuring your legality in doing this. I don't begrudge them but I believe it's important to be honest about the strategy.

The question you should ask yourself is if you truly want to leave your care and wellbeing and even nursing home placement to bureaucrats at the Department of Human Services. Go spend some time at the Department of Motor Vehicles and then decide of you want their peers at the Department of Human Services making decisions about your long-term care. I don't and I don't think you do either.

#4 - I'm too young to get Long-Term Care insurance.

I have advised people that they might be too young to start long-term care planning even as I applaud them for looking to securing their future. Even so, you are not too young if you are a professional in your 40s or 50s. We all have our individual Life's Race. None of us know how long our particular race will be, but all of our goals should be to finish the race with our heads held high (I used to run a LOT so pardon the running analogy!). Yes, you might be too young if you have other areas of your insurance or financial planning that still need attention.

Last week I met with a 26 year old young man. He primarily wanted to secure life insurance to protect his family. Without diving too deeply, we looked at a permanent plan (he was absolutely opposed to a Term policy) that's cash value grew, building him an asset. As it happens, his grandmother is currently using home care services in her home. While it never would have occurred to me to ask a 26 year old about this, he asked if his cash value could be used to pay for a service like that. Well of course it could, though it was definitely not on my radar screen to even share that possibility with such a young man.

So, you could be too young but it quite possibly is not too early to plan for the end stages of your life's race.

#5 - I have enough savings to pay for any extended care situation.

When I owned my home care agency we served a lady whose family had come in from literally all over the country because her doctor had told them that she might not survive another week and they wanted to pay their final respects and even start planning for her service. My agency was hired to serve their mother and we were there around the clock. She had abundant liquid assets so the $3,000 they paid my agency for the week was not a big deal to them at all.

Fast forward a year and a half later and their mother was still living and my home care agency was still serving her at the same rate and service times (24 hours a day, 7 days a week at $19/hour). You can do the math on what they paid my home care agency over the course of that 18 months, but I'll help you out. They paid my agency close to a quarter of a million dollars!

In her case, she had the ability to weather those expenses and you may too. Her adult children were exceptionally pleased with my agency's care of their mother. And frankly, they weren't even looking for a big inheritance. However, I can't help but think how much more pleased they would have been if she had been able to leave those assets to a favorite charity (she definitely had one) or to grandchildren. The cost for our care would have been the same but she very definitely could have paid only a fraction of the total cost - literally saving probably 80-90% - if she had the opportunity to secure a hybrid Life/LTC insurance policy.

So, yes, you very well might have the liquid assets, aside from those positioned for living expenses for a spouse, to self-fund an extended care situation. But for most people, it just makes good sense to include that planning in your overall financial plan.

Can I send you my favorite hybrid Life/LTC insurance plan?

This is really low-key, but I'd like to email you information on my favorite hybrid Life/LTC insurance plan. There's certainly no obligation when you receive it but many people ask to schedule a time to visit over the phone. In any event, you will at least have received some valuable information from which to make the best decision about your planning.

Send me your favorite hybrid Life/Long-Term Care insurance plan!