AboutDave Bowman Expertise I will answer questions of a general nature regarding life insurance, disability income insurance annuities (fixed and variable) and long term care insurance. Also, questions regarding estate analysis. No legal or accounting advice, as I am not a lawyer or a CPA. I do not sell health insurance, so have limited knowledge of the current status of that field.
Experience
Past/Present clients Families, professionals, small businesses, individuals.
Question Given the following scenario, would you advise the purchase of long term care insurance?
Husband age 58 Wife age 56. Son 10.
Household income $225,000. Financial assets (variety of mutual funds and CDs) $1.5 Million (excluding home owned free and clear worth apoproximately $600,000). Pensions (including Social security: at age 65 approximately $10,000 month.
Health of both husband and wife are good.
Would the family above be better served by potentially paying out of pocket for LTI or purchasing a policy? If purchase is recommended, at what age?
Thanks.
Answer On the face of it, you are arguably at the level of income and assets where you could afford to fund your own long term care needs out of pocket. With that said, there are good reasons to shift some of the risk off to an insurance company. First of all, there is no guarantee that one of you won't develop Alzheimer's or dementia and spend eight or more years in a nursing home. The cost of 24 hour home health care would be as high, even if practical. Assuming that you want the non-institutionalized spouse to continue their lifestyle and potentially leave a legacy, you won't want to be expending $80,000 a year or more from your assets over a long period of time.
One solution to keeping costs in line is to purchase a "lump sum" cash or reimbursement benefit - say $500,000 for each spouse, with a simple inflation rider. A shared care rider can also lower the cost of care. This is where both spouses share a single benefit pool, making the majority of benefits available to the spouse who ultimately needs the most care. Lastly, using a 120 to 180 day waiting period can further lower costs.
Now, when do you purchase LTC insurance? Right now. Waiting is a fool's game just because it increases the premiums, but because underwriting for long term care can affect cost even more ddramatically or even eliminate this as an option for one spouse. Some companies make their policies less costly for a couple who may have a child headed to college and subsequently allow them to raise the amount of benefits as the years go by. Some policies provide guaranteed purchase rights to add benefits without having to qualify from a health standpoint.
This represents my opinion, so please take it for what it's worth.
