RETHINKING LONG TERM CARE (LTC)
“The largest un-funded liability facing Americans today”
Americans are finally beginning to acknowledge what author Ken Dychwald stated several years ago in his best selling book “Age Wave” – that long term care expenses are “the largest unfunded liability facing Americans today.” Irrespective of age we insure our homes, cars, lives and (frequently) our incomes. However, most individuals have ignored the one event that could wipe out a lifetime worth of savings – a severe illness or accident requiring long term care services.
The average annual cost of a nursing home stay now exceeds $52,000 (2000-2001), and in many states it is much higher. Furthermore, the cost of home care has risen dramatically over the past few years, to where it can equal or exceed the cost of nursing home coverage.
These staggering costs, combined with the five major trends discussed below, have served to increase the awareness and purchase of private LTC insurance by Americans of all walks of life..
Let’s quickly review each of the 5 major trends that have the American public – especially those approaching retirement age – actively purchasing LTC Insurance.
1. Perception of the Coverage: LTC insurance is no longer viewed simply as “nursing home protection for the elderly.” It is now considered a critical component of one’s total estate and financial plan. The insurance coverage goes well beyond paying for the LTC expenses of the insured – it is asset protection and freedom of choice protection! This change in perception probably accounts for why the average age of the LTC insurance buyer has dropped from approximately 70, five years ago, to about 62 today (2000-2001).
2. Demographic Trends: Over the next 10 to 15 years, 76 million baby boomers will reach age 65, and, we are about to experience the largest inter-generational transfer of wealth this country has ever experienced. These aging “boomers” understand they can’t rely on the federal government to cover their long term care expenses. Medicare pays only a fraction of LTC costs, and Medicaid is there only for the unlucky few who must “spend down” their assets to or below the poverty level. Protecting that wealth for future spending, charitable giving, health care choices and inheritances requires the purchase of LTC Insurance (LTC-I).
3. Personal Experiences: Studies show that a major decision factor in why people elect to purchase LTC Insurance is personal experience with a long term care disabling event. In this day and age, who ISN’T caring for an aging parent, spouse, relative, etc. The drain placed on the caregiver – financially, professionally and emotionally – can be huge. LTC Insurance provides the funding so that families can have freedom of choice over where care is provided, and who provides the care. This ends up protecting both assets & peace of mind!
4. Awareness and Understanding: Browse through a personal finance magazine, or your local newspaper, and before too long you’ll read about the cost of delivering long term care services. Or, you’ll see an article that describes how LTC Insurance works. This increased exposure of the long term care risk, and their funding solutions, has sensitized an entire generation of Americans of the need to address “the largest unfunded liability facing us today!”
5. Federal and State Tax Incentives: To help send the clear message that Federal and State governments cannot deliver another entitlement program, tax incentives are being provided – to both companies and individuals – for the purchase of private LTC Insurance. Currently, 22 states provide either a credit or a deduction on state tax returns for citizens who pay their premium “out-of-pocket” with after-tax dollars. In addition, the Federal Government allows most companies to deduct the cost of LTC Insurance premiums as an ordinary and necessary business expense. Initiatives are underway in Washington, DC to provide more federal tax relief to individual premium payers and caregivers.
You owe it to yourself to seriously investigate LTC Insurance. You have worked too hard to create a life’s savings that could be easily wiped out because of one severe illness or accident. You deserve to have protection of your assets from such devastating costs, and to have freedom of choice over where you receive care, and who provides that care. Long Term Care Insurance (LTC-I) can help provide this protection and the peace of mind that goes along with it (adapted from AHIA newsletter of 5/2001 by J. Foley).
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