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Mitigating the risk of long-term care: Guest view

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Anthony M. Conte, managing partner at Conte Wealth Advisors
Anthony M. Conte, managing partner at Conte Wealth Advisors - (Photo / )

Have you ever ridden a motorcycle without a helmet?

If you have, you were certainly aware of the risk. At least once somewhere along the way someone likely mentioned that it wasn’t safe to do that, but that doesn’t mean you didn’t do it.

Ever gotten in a car and not worn your seatbelt?

Or maybe you got on the Mad Tea Party ride in Disneyland even though you knew you would get the spins. And did you drink a giant soda before you did? That might be why you vomited.

You are probably taking a similar risk, if more pronounced and financially impactful, this very moment, but you’re not alone. There are more than 300 million Americans, and only 8 million are covered by some form of long-term care insurance.

Who needs it?

The population of older Americans is projected to double between 2000 and 2030, growing from 35 million to 71.5 million, while the number of older adults with disabilities is projected to double from 2000 to 2040, according to the American Association for Long Term Care Insurance. This means that the population of older adults with disabilities will have reached 21 million people by 2040.

Of those who need long-term care, 63 percent are aged 65 and older while the other 37 percent are aged 64 and younger, according to a study by Georgetown University.

Clearly this is not just a need for those of advanced age, but rather a concern for all of us.

Why bother?

If you are married or if you have family to whom you had planned to bequeath your assets, then this is a story of protecting what you’ve earned and saved over your life.

National average costs for long-term care in the United States, according to the U.S. Department of Health and Human Services, are around $253 a day for a private room in a nursing home. A month averages $7,698, and according to the National Care Planning Council, the average stay in a nursing home is 835 days.

For the average stay in a long-term care facility, approximately 2.3 years, you or your loved ones could be on the hook for over $211,000. Remember that many people will outlive the average and will have to spend down their assets to nearly nothing before Medicaid will step in to help out.

But it's so confusing

After bludgeoning you with scary facts, I am now going to attempt not to baffle you with too much insurance-speak

The definition of needing long-term care is pretty consistent across most insurance policies that provide these benefits. Simply stated, if the insured cannot complete two of the six defined “activities of daily living” (or ADLs) then the long-term care benefit will often pay out.

ADLs are defined as bathing, dressing, transferring (getting into a bed or wheelchair etc.), toileting, continence and eating.

Once someone is confirmed by a medical professional as in need of long-term care, the insurance policy will eventually begin paying a daily or monthly benefit to help mitigate the cost of care.

For those who have reached age 65 the lifetime probability of becoming disabled in two of the six ADLs is 68 percent, according to a report by AARP.

What kind of policy should I get?

Just like life insurance, the rigorous application process for a long-term care policy will almost always include medical underwriting, a review of your medical history and often a physical examination.

The longer you wait to purchase long-term care insurance, the more expensive the premiums become, and if you wait too long, you may find that the medical conditions you accumulate over the years have disqualified you for coverage at all.

The conundrum is that if you purchase it when you are young, you will likely be paying for it for a very long time, and what many people don’t know is that traditional long-term care insurance policies have the freedom to increase the cost of your premiums in later years.

And what if you die without ever needing long-term care? Most traditional policies simply disappear when you do.

The rise of non-traditional policies

The solution to these challenges may exist in a life insurance policy.

Many permanent life insurance policies now offer no-cost or low-cost “chronic illness riders” that provide benefits for those who cannot complete two of the six ADLs.

Additionally, the premiums on many permanent life insurance policies are fixed and do not increase over your lifetime.

Of course, given the wealth of products available and the variety of benefits they offer, a licensed and knowledgeable insurance adviser should be consulted to discuss which product might best suit your situation.

Anthony M. Conte is managing partner at Conte Wealth Advisors based in Camp Hill. He can be reached at tconte@contewealth.com.

Registered Representative Securities offered through Cambridge Investment Research Inc., a broker/dealer, member FINRA/SIPC. Investment Advisor Representative Cambridge Investment Research Advisors Inc., a Registered Investment Advisor. Cambridge and Conte Wealth Advisors LLC are not affiliated.

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