Long-term care insurance
Randy Hargett of Capstone LTC Advisors joins the podcast today to discuss long-term care insurance. Randy has worked for Capstone for over 18 years, advising individuals on long-term care options. Capstone is endorsed by the Dave Ramsey show and Randy is someone the Wiser team trusts for sound long-term care advice for our clients.
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Wiser Wealth Management does not sell any products but we do give advice on various insurance policies. Randy Hargett of Capstone has been a trusted partner and someone we refer clients to for help in choosing the best long-term care policy. Casey and Randy start the podcast by discussing how many people do not believe long-term care is necessary for them. Randy encourages clients to view long-term care in the same way as they view homeowners insurance. Many of us continue to pay for homeowners insurance, even after our mortgage is paid-off. However, the reality is that only 1 out of every 1,200 people will need to rebuild their home. In comparison, for those that reach the age of 65, 2 out of every 3 will need to be cared for before they die. Long-term care cost is one of the biggest risks to your estate and should be evaluated appropriately.
How much is long-term care?
The cost of someone going into a long-term care facility is around $8,000 per month. We use this amount in our financial planning process to assess the financial needs of people as they age. However, the facilities and quality of care vary in terms of private pay vs. Medicaid paid. Randy is passionate about long-term care insurance because of a personal experience with both of his grandmothers. His family went through approximately $900,000 to pay for both grandmothers to live in assisted living for six years. He has firsthand experience related to the cost of care and the importance of having some form of insurance to protect estate value.
Long-term care insurance allows you to have a plan to stay at home for care vs. going to a facility. Nursing home, assisted living, adult daycare, Alzheimer’s/Memory care unit and home care are all types of care that can be covered under insurance. 80% of long-term care in the US is still given to people in their homes. Home care is more important than facility care. Most people would rather stay home as they age than go to a facility.
There are three ways to fund long-term care. You can use your own out-of-pocket assets to pay for care or, if you have no assets, you can utilize Medicaid or government assistance, or you can also use a long-term care insurance policy. Within the insurance option, there are three types of policies one can purchase. With a traditional long-term care policy, there is a pool of money that you have available to help pay for your care. It’s just like a homeowners policy. Usually 70% of people have a traditional plan. Next is a hybrid plan, that has the same benefits as a traditional care policy, but if the policy is never used, it pays a death benefit. About 20% of people have a hybrid policy. The third option is a short-term care policy. This is typically for people with health issues that prevent them from qualifying for a traditional or hybrid policy. This builds a hedge of protection for your family in case you need to be cared for. The underwriting is more liberal, so those that have been denied for the other two policy types will typically be approved for a short-term policy.
Casey and Randy discuss how some people with older policies (pre-2014) have received increases to their premiums. This is due to the way the insurance funds miscalculated the actuary tables and portfolio gains. Since 2014, this problem has been addressed by the insurance companies and a notice of increasing premiums is less common. If you have a long-term care policy and receive notice of a price increase, be sure to speak with the agent that sold you the policy or with the insurance company. Federal regulations require they provide options to you.
Financial planning is important
Long-term care policies are in place to prevent financial disaster. With a proper financial plan, you can determine how much insurance you truly need. This allows for the client to understand exactly how much is needed so they do not fall prey to overselling insurance agents.