Long-Term Care Insurance

A close relative of mine has always been a saver. He would squirrel away money and only bought used cars rather than new. When it came to wanting something that was new, even if it was on sale, he would instead choose to purchase used if in fact he couldn’t build it himself in his basement workshop! I have always appreciated his sense of economy and frugality. But he is now of the age where he has had to sell his house and move into an independent living arrangement. The cost is high due to there being staff on duty should he or his wife need help.

After living in that arrangement for a couple years, his wife began to show signs of serious memory loss, aka dementia and Alzheimer’s. After several months of worsening behavior, it became evident that she needed to move to the memory care unit. Suddenly my relative’s rent went from $3,000 per month for both of them to an additional $5,500 per month just for his wife! Then, within a couple more months her Alzheimer’s caused her to forget how to walk and the facility staff informed my relative that it was time to move her to the full-blown nursing center. This raised her rent to $12,500 per month, in addition to the $3,000 that my relative continues to pay for himself. A total monthly cost of $15,500 is causing him to blow through a lifetime of work savings at an alarmingly fast pace. If he ends up out of money he will have to become a recipient of Medicaid and likely need to move, since the facility where they live is private-pay only. Medicaid rules will force her to be moved to the next closest available “bed” even if it is a long distance from where my relative lives now.

It is hard to watch the person I love trying to provide for the one he loves but knowing that they are outliving their resources. When I asked him what he thought would happen when he put them into the “system,” considering what he had financially after he sold his house, he said, “I didn’t expect that either of us would live this long!”

I do not profess that insurance solves every problem we face as we age, but there are effective tools it can provide us: life insurance pays our beneficiaries when we die to pay final expenses like medical bills and estate taxes; disability income pays us when we are unable to work or earn a living. However, Long-Term Care insurance (LTC) is what pays us or our loved ones when we need home care or nursing home assistance. My wife and I have purchased policies that will pay us for the care we will need to pay when our bodies or minds are no longer able to allow us to remain independent. Statistics tell us that when one enters a nursing home we are likely to live, on average, 1.5 years. Considering the cost of nursing homes, that would amount to approximately $225,000 at the rate that my relative is paying for his wife. Account for inflation between now and then, that figure will be a much larger obligation for my wife or me, and I do not intend to let this become the problem that my relative currently faces.

I consider it a favor to myself, my wife and my children to insure my current health in this way and am happy to exchange the relatively small premiums versus the uncertainty of what my care may cost when I am my close relative’s age. After all, we shouldn’t let our working year’s savings be eaten up faster than our longevity demands. There are ways to insure our golden years will be golden, and the earlier we apply for LTC insurance, the lower the rate will be and the less we will need to fear the unknown future expenses of long-term care.

For a free LTC planning guide and/or confidential consultation, please contact Merriam Insurance.

Brian H. Merriam, CPCU, ARM, AAI
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