Introduction

Madison: Hello, everyone, and welcome to Not Just Numbers Honest Conversations with a Financial Advisor and Lawyer. I am Madison Demora, and I am here with Mike Garry. Mike is a financial advisor and CFP and the founder and the CEO of Yardley Wealth Management. He is also an estate planning lawyer and his law firm is Yardley Estate Planning. Hey, Mike.

Mike: Hey, Maddie. How are you?

Madison: Great. All right, so this is series three of our five part series. So today we’re going to discuss, is long term care insurance something you should consider?

What is Long Term Care

Madison: All right, Mike. So my first question, what is long term care and why is it important to consider in retirement planning?

Mike: Sure. Long term care refers to a range of services and support needed by individuals who have difficulty performing basic daily activities independently due to illness, disability or aging. Long term care insurance can help cover the costs associated with such care, typically paid for by individuals through insurance premiums or personal savings.

Medicaid Coverage

Madison: Okay. Under what circumstances does Medicaid become involved in covering long term care expenses?

Mike: So Medicaid can step in to cover long term care costs when an individual has depleted their own financial resources and meets specific income and asset eligibility criteria. It often becomes a safety net for those who have exhausted their own resources. So usually Medicaid kicks in by the time you’re quite poor.

Covered Services

Madison: Okay. All right, so what types of services and care are typically covered by long term care insurance policies?

Mike: Long term care insurance policies can cover a range of services, including nursing home care, assisted living facilities, in home care, and adult day care. The specifics of coverage can vary based on the policy chosen.

Important Policy Factors

Madison: Okay, so what are some important factors to consider when purchasing a long term care insurance policy?

Mike: Sure. So, individuals should assess such factors as the policy’s coverage limits, the benefit period, the elimination period, the premiums, inflation protection options, and any additional riders or features that may be offered. So the coverage limits will be how much per day benefit the policy pays. And so that could be 100, 200, $300, probably more now. The benefit period is how long the policy will pay out for, like one year, three years, five years, lifetime. The elimination period is a period of time where you pay for the services yourself before the policy kicks in. So it could be 30 days, 60 days, 90 days, 180 days. And then the inflation protection option, some people have policies without it. Some people have it based on a couple of different factors. It could be figured out a couple of different ways, but inflation is a big thing. If you’re going to be in care for a long time, inflation might make a big difference. And then there’s all kinds of other riders and features that may be offered, and maybe they’re important to you. But if you’re shopping for the coverage, you have to look to see what you think might be important to you and what it costs and make your decision based on that.

Alternative Coverage Options

Madison: Okay. All right. So aside from long term care insurance, what other options are available for covering long term care expenses?

Mike: Yeah, I mean, the big alternatives are like self funding through your personal savings and investments. Right? So you have money set aside and that you might need, relying on family support, living with somebody, or their actual financial support. Using some sort of hybrid insurance products, they combine long term care benefits with life insurance or annuities and exploring government programs like Medicaid. These hybrid programs, I think that they have become a big thing. Insurance companies really struggled with long term care insurance. The cost is pretty exorbitant, but I think that they still aren’t making out great. A lot of companies have stopped providing the policies because they’ve had such bad financial returns from them. So I think these hybrid policies are a way for the insurance companies to try to do this and a better way for them. I don’t know if that means there’ll be a better way for the consumer, but maybe there’ll be options for consumers that are okay. So, yeah, that’s the state we’re at right now.

Evaluating Long Term Care Insurance

Madison: Yeah. What factors should individuals consider when evaluating whether long term care insurance aligns with their financial plan?

Mike: So factors to consider include an individual’s current health, their family medical history, their financial resources, risk tolerance, and overall retirement goals. Consulting with a financial advisor can help individuals make an informed decision. You know, I think that this is one of the harder questions in financial planning because we have people come in and a lot of people make their decisions on long term care based on the results of, like, family members of theirs, whether parents or siblings or aunts or uncles. And people can.. I could have two appointments in a day where one person says they got a policy or their loved one got a policy and it’s the best decision, and then the next person come in and say they got a policy from the same company and it was an awful decision. They had all sorts of problems with the insurance company. So it’s a, it’s a really difficult decision. And I think in this case, it really is a personal one for, for many people. Much more personal, I think, than a lot of other financial planning decisions. It’s a, it’s a tough choice and there’s no right answer. It really comes down to what feels right to you. After, you know all the financial parts.

Madison: Yeah. Sounds like some research is definitely involved.

Mike: Yep.

Downsides and Limitations

Madison: All right, so are there any downsides or limitations to long term care insurance that individuals should be aware of?

Mike: Sure, there’s lots of them. So some limitations include the cost. Right. It’s expensive. Potential rate increases, which happen a lot, and the possibility of never needing long term care, in which case permanent premium paids are not recouped. I’m okay paying for my term life insurance to protect my wife and my kids. It’s expensive every month, and I hope that I don’t need it. But long term care is even more expensive, I think. And if you don’t need it, I don’t know. I think people have more regret with that than again, because you know you’re going to die and not everybody needs it, but a lot of people need some sort of help towards the end. And so it’s something that a lot of people think about and they don’t want to be a burden on their kids, but then who knows if they’re ever going to need it. It’s hard. It is a tough choice.

Policy Customization

Madison: Yeah. So is it possible to customize a long term care insurance policy to address individual needs and preferences?

Mike: I believe that it is. I think that they can offer, like, various options and riders that allow individuals to tailor coverage to their specific circumstances, such as adding homecare benefits, or adjusting the benefit period. You know, all those things will factor into what it costs. And that’s always a big factor, like what is this all going to cost and how long am I going to be paying premiums for? When I talked about the life insurance before, it might be a little bit misleading. Right. So if I have a 20 year term policy, I pay the same premium every year. And those would all be for premature death. Right. So my policy ends at like 66 or 67, and I hopefully I’ll live a lot longer than that. But the long term care policy you need to pay for pretty far in advance too, because you cant get a policy when you’re 80 and in poor health. Either they wont write it or be really expensive. So you need to start shopping for a policy in your late fifties and early sixties. So it could be the same thing where you pay for 20 or 30 years and never need it, but you would still likely to die much sooner. Right. While you’re still paying the premiums. And so I think that’s why it’s such a hard decision.

Madison: Yeah, absolutely.

Mike: It’s a good topic to explore and people should think about it more and should decide whether it’s right for them.

Conclusion

Madison: Yeah. All right. This was awesome.

Mike: Thanks, Maddie. This was great. Great questions.

Madison: Of course. All right, so you can join us for our next episode for the fourth out of our five series, which will be: Understanding Medicare basics. For more information on Yardley Wealth Management or Yardley Estate Planning, you can visit our website at yardleywealth.net, and yardleyestate.net. You can also follow us on socials at Yardley Wealth Management. This podcast has been produced by Madison Demora and Mike Garry with technical and artistic help from Poe Productions.