When caring costs too much – Making the right decision about LTC

by Luke Davis, Stewardship Capital

A while back, my parents and I had a conversation about long-term care (LTC) insurance. Talking about the possibility of one or both of them needing this kind of care wasn’t fun for any of us, but that made it no less important.

It’s one of those decisions many people put off until they urgently need it. Unfortunately, with LTC insurance, waiting too long can make a policy significantly more expensive or even unavailable.

Determining whether LTC insurance is right for you isn’t simple. There’s no one-size-fits-all answer. When evaluating it, several key factors must be considered. For example, what is your family’s health history? Do you have close relatives who’ve experienced Alzheimer’s, Parkinson’s, or strokes? If so, you may be at increased risk, and LTC coverage could be a wise move.

Another major consideration is your financial situation. LTC insurance isn’t cheap, and it typically becomes more costly as you age. You must weigh whether you can afford the premiums now, and whether you’ll still be able to afford them when you’re most likely to need care. At the same time, consider the alternative: potentially paying $50,000–$100,000 per year out of pocket for care, something that can quickly erode savings and retirement assets leaving a healthy spouse high and dry.

You should also examine your support system. Do you have family members who are willing and able to provide care? And what are your intentions regarding leaving an inheritance to a surviving spouse or children?

These and many other questions should be addressed before making a decision about purchasing LTC insurance. But even after obtaining a policy, many people don’t realize that coverage isn’t static. Insurance companies are likely to present you with new options throughout the life of your policy as an alternative to increased premiums.

For instance, due to rising claims and an aging population, many insurers offer a buyout option, where the insurance company pays you a lump sum to cancel the policy, or may propose benefit reductions, which keep your premiums steady but reduce inflation protection or daily benefit amounts.

While these alternatives to rate increases might seem like an opportunity to save money or simplify your financial plan, they can have major long-term consequences. Accepting a buyout or reducing coverage may leave you underinsured in your later years. On the other hand, accepting continued premium increases might make the policy unaffordable just when you need it most.

That’s why, whether you’re purchasing your first policy or reevaluating an existing one, it’s critical to work with a fiduciary, someone legally required to act in your best interest. A fiduciary can help assess not only your current circumstances, but also your evolving financial needs and goals, to ensure your coverage remains aligned with your overall plan.

In my parents’ case, we ultimately decided that LTC insurance wasn’t the right fit for them at this time. But for many, it isn’t just a good idea, it’s essential.

If you’d like help determining if LTC is right for you, or if you already have a policy and need help navigating the range of options your provider is offering, we’re here to help. At Stewardship Capital, we work as fiduciaries to provide honest, objective advice so you can make informed, confident decisions that are right for you and your loved ones.

(Past performance is no guarantee of future results. The advice is general in nature and not intended for specific situations)