To preserve and protect: Understanding how long term care fits into your financial plan

Spotlight on Finance

— Your financial household should be no different. As you, a parent, or other relatives get older, the impact of long-term care cost on a lifetime of savings and investing becomes very real. So faced with the same question, which would you choose: using your entire financial household to support your lifestyle without any protection from loss, or using most of your financial household with some level of protection?

Long-term care insurance is one way people can secure this protection. It is a common part of financial plans for the following reasons:

  • Long-term care expenses are costly and can severely impact your retirement savings and relative standard of living.
  • Health or disability insurance plans do not provide coverage for long-term care expenses.
  • Federal or state assistance programs restrict the amount of assets you are allowed to keep before long-term care coverage is provided to you and your choices of facilities and services are limited.
  • Long-term care insurance allows you to keep your dignity and make your own decisions. You can choose the facility you want and may often be able to receive care right in your own home.

When it comes to choosing a long-term care policy a variety of options are available to move the risk. You can use a portion of your cash flow to secure protection each year, or you can move a principal portion of your assets on your household balance sheet—from income producing to asset protection—and own a level of protection throughout your lifetime. Either way, you purchase a policy that pays a predetermined amount, usually a daily or monthly benefit, toward the cost of care. You are free to choose the facility or care service you want.

Long-term care insurance benefits become payable when the insured person is no longer able to perform a number of predefined “activities of daily living,” such as dressing, bathing and feeding oneself.

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