With Baby Boomers reaching the age where long-term care is needed, the long-term care insurance conversation is going to be an active one.
Perhaps you believe you are going to stay healthy right up to the point you pass away. Perhaps you believe you are going to meet some sudden event that ends your life.
But if you are not one of those two types, you may live long enough to lose complete control of your ability to care for yourself. It’s not a pleasant thought, but it is a fact that a majority of Americans will need some form of long-term care at the end of their lives.
That is why so many Americans are considering the expensive proposition of buying long-term care insurance.
Spectrem’s recent whitepaper, Decisions Regarding Long-Term Care Insurance, details not only the current ownership level of long-term care insurance among wealthy investors, but also the interest level in future ownership. Current ownership ranges between 20 and 30 percent, depending on wealth, while future ownership ranges between 20 and 33 percent, again depending on wealth.
The most telling information from the whitepaper is why investors do not buy long-term care insurance. Among those with a net worth between $100,000 and $1 million, 37 percent say it is too expensive. Among Millionaires with a net worth between $1 million and $5 million, 36 percent say they are saving for long-term care with other savings vehicles, and 52 percent of the Ultra High Net Worth investors with a net worth between $5 million and $25 million also say they have other ways to pay for long-term care.
The insurance industry has taken note. While more than 100 companies offered long-term care insurance 10 years ago, the number is now down to around 20. While premiums are expensive enough to cause some investors to forego purchase, claims themselves are expensive, and with Americans living longer, more claims are being made.
As a result, insurance companies are wary about issuing policies that will end up costing the company more than it makes in premiums.
Insurance companies are also declining long-term care insurance in 20 percent of applications due to existing medical conditions, such as obesity or disability.
There are changes being made in the policies themselves to make them more attractive and easier to pay for in some cases.
Some policies now combine long-term care with regular life insurance. According to industry trade group LIMRA, there were more individual life combination policies sold in 2014 than in 2013, with just under 100,000 such policies purchased last year. Combination life products represented 12 percent of total new premium sales for the individual life insurance market in 2014.
As it works, the policies cover long-term care up to the coverage limit. If those funds are not used in total, the balance is paid out to beneficiaries upon death, similar to a regular life insurance policy.
This would make the long-term care policies more attractive to those who see them as a waste of money if long-term care is never required.
According to the American Association for Long-Term Care Insurance, most people start planning for long-term care between the ages of 52 and 64, but advanced age does affect premiums.
Finally, long-term care premiums are tax deductible, up to limits set by both the federal government and state governments based on the age of the taxpayer. If you have enough medical expenses to itemize, you can include your long-term care premiums in the total cost of medical expenses in any one year.
Kent McDill is a staff writer for Millionaire Corner. McDill spent 30 years as a sports writer, working for United Press International and the Daily Herald of Arlington Heights, Ill. From 1988-1999, he covered the Chicago Bulls for the Daily Herald, traveling with them every day through the nine-month season. He also covered the Bulls for UPI from 1985-88, and currently covers the team for www.nba.com. He has written two books on the Bulls, including the new title “100 Things Bulls Fans Should Know And Do Before They Die’, published by Triumph Books. In August 2013, his new book “100 Things Bears Fans Should Know And Do Before They Die” gets published.
In 2008, he resigned from the Herald and became a freelance writer. The Herald hired him to write business features and speeches for the Daily Herald Business Conferences and Awards presentations.
McDill also writes a monthly parenting column for the Herald’s Suburban Parent magazine.
McDill is the father of four children, and an active fan of soccer, Jimmy Buffett and all things Disney.