In case you hadn’t noticed, the premium for a traditionally designed long-term care insurance (LTCI) policy has finally exceeded the ability of the middle class to pay for it.
(If your target market does not include the middle class, read no further. This article will be of no interest to you. There are plenty of ways for the affluent to transfer the risk of having to pay long-term care costs to an insurance company.)
The problem is still there
The middle class is financially vulnerable to the probability that they will “take too long to die.”
Among those people, the most vulnerable are single individuals (women especially), and those that will have to pay for care out of their retirement savings and Social Security.
Statistics don’t mean a thing if it happens to you, but the most reliable risk assessment that I have seen documented is this: About one in six of those who live beyond 65 will need two years or more of care for the routine activities of daily life.
On the other hand, that means that five out of six may not experience any estate-crushing long-term care costs. So, how do we as financial and insurance professionals approach this topic realistically and intelligently with our account holders and clients?
People are living longer, but not necessarily better.
A spouse or an adult child will not take out a gun and shoot anyone that needs help getting dressed and bathing.
Having to pay for at least some private care for daily activities before dying is a real possibility. Caregivers will be spouses or adult children.
Beyond family, the cost for private caregiving may be high. Paying for those costs out-of-pocket can deplete investments and savings, and may require the sale of real estate.
There’s a way to leverage that risk. That is, one can pay a few dollars now (insurance premiums) for having more dollars available later in case long-term care is needed.
Paying premium against that probability is wise and prudent as long as it can be afforded now and into the retirement years. Adult children should be in on the discussion of insurance if at all possible.
It is very likely that they will be caregivers and have to bear part — if not all — of the cost of care beyond what they can provide as far as family caregiving is concerned. Adult children should consider the practicality of helping to pay for long-term care insurance on their parents.