ParentCare » Vol. 16

Do Your Parents Need Long Term Care Insurance?

Parentcare – A Section for Today’s Caregiver

By Tom McDavitt

Most of us don’t care to consider the problems of aging. We are witness to so many medical breakthroughs that keep us alive so much longer than our ancestors, but most of us have seen the realities of declining health in our families and the need for added custodial care. Just as we empty the nest and finish financing college expenses for our kids, we oftentimes are forced to deal with the care of our parents.

We all hope that we will be the lucky ones and won’t need to find care for our parents, but statistics tell us that we are in for a grim awakening. In fact, more than 40% of people over the age of 65 will need some form of long term care.  As life expectancies increase, that number will likely increase as well!

Long-term care can also be expensive. What’s more, Medicare, Medigap, managed-care programs like health maintenance organizations, and indemnity medical insurance plans don’t pay for long-term nursing home care or for assisted living. Although Medicaid, a state-administered federal welfare program, will cover the costs of long-term care, your parents must be legitimately impoverished to be eligible for it.

If they’re not prepared, your parents might find their lifetime savings and their assets quickly depleted by the cost of paying for long-term health care. As their child, you’ll want to help them protect those assets (and your own inheritance) from being eroded by long-term care costs. One solution to this dilemma might be long-term care insurance (LTCI).

Personally, I watched my mother battle ALS a few years back and she was treated at home for as long as possible before she was admitted to a facility. The cost of care exceeded $10,000 monthly throughout. That didn’t include her other monthly expenses to maintain her home. We were fortunate that she had obtained a long term care policy many years earlier that paid about 50% of her care each month. Not all of her hard earned money was exhausted.

Generally, LTCI helps pay for the care of an individual who can no longer independently perform the basic activities of daily living, such as bathing, dressing, eating, and toileting, due to a cognitive disorder, illness, or injury. A comprehensive policy will cover skilled, intermediate, and custodial care in a variety of settings, including nursing homes, assisted-living facilities, adult day-care centers, or the insured’s own home.

The cost of LTCI policies can vary widely depending on many factors, including the coverage selected and the age and health of your parents. The younger and healthier they are, the less expensive the insurance will be ~ but the longer they might pay for it before they really need it.

Deciding whether to purchase LTCI will take some careful consideration. LTCI might be right for a parent if at least some of the following criteria apply:

• He or she is between the ages of 40 and 84

• He or she has assets greater than $250,000

• He or she has an income from employment or investments in addition to Social Security

• The cost of the premiums will not exceed 5 to 7% of your parents’ annual income (or yours, if you’re paying the premiums)

• He or she is healthy enough to be insurable

Have a talk with your financial advisor to determine if this is something that you should be pursuing.

Thomas J McDavitt, McDavitt Wealth Management, 102 Shore Drive. Worcester, (508) 852-6222, (800) 539-8517, Tom@cmfin.com

Securities and Advisory Services Offered Through Commonwealth Financial Network, Member FINRA/SIPC, A Registered Investment Adviser

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