If the recent COVID-19 crisis has taught us anything: it is that a nursing home is the last place you want to be. Statistics are coming in daily that the highest concentration of deaths occur with people who are in nursing homes. Not that they were ever the most ideal places to begin with, but now it is even more imperative to avoid them at all costs.
Hence the solution of making sure you have some sort of long-term care protection. Traditional policies are rather expensive and have a nasty habit of rising premiums. We prefer a hybrid approach, one that will pay your beneficiaries a death benefit if it is not used or utilizing the rider to pay most if not all the LTC expenses through the death benefit. The other key component is to make sure that it will cover not just nursing home, but care in your home if you desire it. Laura and I became aware of this when her mother got sick and required round the clock attention. Mom had purchased a policy that had the rider that would provide benefit if it were deemed that she needed it. Sadly, the local advisor/agent who sold mom the policy was not even aware this feature was in the contract. Fortunately, with a couple of calls to the carrier, we were getting mom’s home health provider paid for and most of the rent on a handicapped accessible apartment covered. Upon her passing, 95% of mom’s assets were intact.
In trying to calculate the appropriate amount of coverage, we utilize planning software that illustrates the potential risk to your finances and what you need to cover the shortfall. Utilizing this hybrid approach, you can cover the risk relatively cheap and if it is not used, it provides a death benefit that is tax free to your beneficiary. But here is the benefit of having an in-depth plan, one that you have paid for. We can do yearly cash flow projections for the life of the client and include the Monte Carlo simulation for a market like we just had. Too often, product salespeople try and get you to purchase more than you need (bigger commission check). The net result of purchasing this solution without having a plan is that because no analysis of your cash flow was done, you end up in the 40% category of people who abandon their policy because of a market turndown. Purchasing an in-depth plan should pay for itself, and by not paying for more insurance than you need, you could easily recoup the cost of the plan in premium savings in either the first or second year.
If this is something you would like to consider, give us a call.
Mike Mickels is President of CochranMickels Retirement Specialists and an avid sporting clay competitor. CochranMickels Retirement Specialists provides personalized planning and investment services to individuals approaching and in retirement. They also provide retirement and benefits training to Federal employees. Securities offered through Registered Representatives of Cambridge Investment Research, Inc., a broker-dealer, member FINRA/SIPC. Advisory services offered through Cambridge Investment Research Advisors, Inc, a Registered Investment Advisor. CochranMickels and Cambridge are not affiliated.