When you think about long-term care, what is the first thing that comes to mind? For many, it can be nursing homes or something associated with aging and growing medical needs. In a broad sense, this is appropriate, but a lot has changed in the last decade or two regarding options and how to finance them.

Boomers (and the next generation of retirees) must plan for the care of the elderly in a different way than their parents, as they face the unclear future of benefits and rapidly increasing medical costs. And they live longer. When it comes to planning, many people have the “it won’t happen to me” attitude, yet approximately 70 percent of people 65 and older will need some form of long-term care assistance in retirement.

Evolving options

The tough question that hangs over many people is how do you plan for these unexpected expenses so they don’t derail retirement? When planning for costs of care, you have options like allocating savings for medical expenses or relying on benefits or family.

Long-term care insurance is another option that people should consider. Over the past few years, insurance products have evolved with care options and trends. Today, nearly half of the benefits paid by private insurers are for home care or assisted living care. Whereas before this insurance was used mainly to pay for skilled nursing care. Many current policies also pay the benefit to the insured or insured, unlike many policies in the past that paid directly to a nursing facility. To understand more about the evolution of long-term care, here is a deeper look at planning long-term care in the past and present:

Government programs: The silent generation (those born during the Great Depression and World War II) were among the first to experience a longer life expectancy and the first to have access to official nursing care facilities. However, the question of whether or not rights would be a topic of conversation for this generation. As more boomers reach retirement age, the potential for government benefit programs to be impacted has become a growing concern, as current benefits may not cover most of the medical services they receive. that a person will face.

Long-term care insurance: Since long-term care insurance is a relatively new idea, many baby boomer parents may not have considered the potential needs (and the associated realistic costs) of formal long-term care. Since then, insurers have developed a number of options to meet the needs of boomers, and over time, the features of insurance have evolved. Some of them include:

  • Direct Long Term Care Insurance Policies: These are policies that pay a benefit up to the daily or monthly maximum. The amount can be paid to the insured person, who can then pay the care provider. The insured person can also choose to pay the caregiver to bill the insurance company directly.
  • Life insurance policies with a single rider: Advanced benefit riders can be somewhat inexpensive additions to a life insurance policy and allow the death benefit (often up to 90%) to be paid before death if the funds are needed for long-term care . Any amount provided to the insured is simply deducted from the death benefit when that person passes away.

  • Policies that combine life insurance and long-term care insurance in a single policy: Some insurance plan options may allow a lump sum premium to be paid for insurance that provides a combination of benefits, such as a death benefit and the ability to advance most of that benefit for long-term care needs. These policies may even include a “right to terminate” contract in which the policyholder can change their mind after a period of time and the full premium is refunded (if no benefits have been paid).

Family: Trusting family may seem like the simplest option, and it is one that many people choose, sometimes out of necessity. However, the emotional, physical and financial stress of family members caring for a dependent family member can be a very big undertaking. If you plan to rely on your family members to meet your long-term care needs, be sure to let them know well in advance so they can create a plan that is tailored to your needs and wants.

An elderly person in need of care can choose from many options to help provide or finance professional care, including family, government resources, self-insurance (if there are enough assets), or private insurance. Each of these options has some merit, but in most cases, no single option will cover everything. It’s difficult to predict what kinds of long-term care needs you may need, so you may want to speak with a professional who can discuss the options for your particular situation.

* There can be many variations in insurance policies, so clients should carefully consider each policy with respect to their own current and potential needs.

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