By Lori D. McGuire, CLU, ChFC
The cost of long-term care is staggering and continues to steadily increase. According to the 2013 Cost of Care Survey published by Genworth Financial, the median annual rate for a private room in a nursing home is currently $83,950, up from $67,525 in 2008 which represents a 4.45% annual growth rate over that period. While there are several long-term care insurance options available in the market to help offset the cost, many people still have questions surrounding how the coverage works and remain unsure of how to sort through the clues and select the best option. Solving the “mystery” of long-term care insurance can be especially important to women as they are statistically more likely to have a longterm care need at some point in the future. Many women are in sole control of their finances and many more may find themselves in that position at some point in the future. According to the most recent life expectancy tables, women typically outlive men by approximately five years, making it very likely that they will bear the burden of caring for their spouse in later years and may be left needing care themselves.
The phrase “long-term care” actually refers to the assistance that people with chronic illnesses, disabilities, cognitive impairments or other conditions may need on a daily basis for an extended period of time. For women, long-term care planning often goes beyond the general definition and expands to the potential impact an extended longterm care need could have on their family’s legacy. Establishing a plan well in advance regarding how you wish to be cared for, along with a source for funding that care can greatly reduce the burden on extended family members and help preserve and protect a lifetime of wealth accumulation. Protecting your financial legacy may very well be one of the most important benefits of longterm care insurance.
What is long-term care insurance? Simply put, long-term care insurance is a way to have all or part of the costs associated with long-term care paid by an insurance company rather than from your personal savings. Long-term care policies are not one size fits all and the benefits, options and premiums can vary greatly.
Currently, there are three main types of long-term care insurance that are available. Standalone, comprehensive policies represent the majority of policies sold today and are structured to cover long-term care expenses including home care, adult daycare, assisted living, and full-time nursing home care. These policies provide flexibility in the daily amount of coverage and in how premiums are billed – monthly, quarterly, semi-annually or annually. With the daily cost of nursing home care averaging $230 per day, it’s important to consider how much coverage you will need based on age, health history, family longevity, income, savings and other factors.
Another popular option is known as a “hybrid” policy which combines the benefits of a traditional life insurance policy with a long-term care benefit option. These policies either add a long-term care rider that allows a percentage of the death benefit to be used for a long-term care need on a monthly basis, or provide an acceleration of the death benefit should you have a terminal long-term care need. Once you have met eligibility requirements, you will have the ability to access all or part of your death benefit to pay for long-term care expenses.
A third type of long-term care policy is generally purchased with a lump sum single premium, but can also be paid over a period of three, five, seven or 10 years. These products offer a money back guarantee within certain limitations should you need access to your cash prior to a long-term care need. Ultimately, the product is designed to provide a pool of money that can be used to pay for long-term care expenses and if long-term care is never needed, a death benefit will be paid to the named beneficiaries.
Long-term care insurance comes in many forms and can be tailored to your own unique and individual financial picture. To learn more about how the coverage may benefit you, we encourage you to talk with your BB&T Wealth Advisor and your BB&T Insurance Services agent. Your BB&T Wealth team will take the time to listen, decipher all the clues and ultimately help you to unravel the long-term care mystery.
About the Author
Lori D. McGuire
Vice President, Life and Financial Planning Division
Lori D. McGuire has worked for BB&T for 18 years. She specializes in life insurance as it relates to estate planning, business succession planning and high level personal planning. Her professional industry recognized designations include Chartered Life Underwriter (CLU) and Chartered Financial Consultant (ChFC). She is licensed to sell Life, Disability, Long-Term Care and Variable Life products and consistently qualifies as a member of the Million Dollar Round Table. Lori’s educational background includes an undergraduate degree in Marketing and a Masters degree from Marshall University in Industrial Relations.