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Focus on Risk: Funding Long Term Care, Exploring Three Strategies to Secure Your Future

Updated: Feb 16




Introduction: Planning for long-term care is a crucial aspect of financial security as we age. With the cost of long-term care in the United States averaging around $7,000 to $9,000 a month, it is essential to consider how to fund these expenses. In this blog post, we will explore the three main options for funding long-term care: self-insuring, traditional long-term care insurance, and innovative alternatives offered through life insurance policies.


1. Self-Insuring: The most common approach individuals take when it comes to long-term care funding is self-insuring. Unfortunately, many people do not plan for their future long-term care needs, leading to potential financial hardships. With retirement being the primary focus, it is challenging for most individuals to accumulate enough funds to cover the substantial costs of long-term care, which can reach up to $14,000 per month for a married couple. Moreover, unexpected long-term care expenses can completely deplete retirement savings, leaving little to no financial support for the other spouse. With increasing life expectancies and the rise of the sandwich generation, where individuals find themselves responsible for aging parents and their own children, proper planning becomes even more crucial.


2. Traditional Long-Term Care Insurance: The second option, traditional long-term care insurance, has been available for quite some time. However, it has faced challenges in terms of affordability and sustainability. Many individuals hesitate to purchase long-term care insurance because premiums tend to increase over time. This, coupled with the potential loss of funds if the care is not needed, makes it a less attractive option for many. Furthermore, the primary focus of the financial planning industry has traditionally been on retirement savings vehicles, and long-term care insurance often takes a backseat. As a result, many insurance companies have stopped offering this type of coverage altogether, limiting the available options.


3. Innovative Alternatives with Life Insurance Policies: Fortunately, the life insurance industry has come up with innovative solutions that integrate long-term care coverage with life insurance policies. These new options allow policyholders to access a portion of the death benefit for long-term care purposes in the event of a chronic or critical illness. With chronic illness defined as the inability to perform two or more activities of daily living (ADLs), such as dressing, feeding, bathing, or transferring, policyholders can receive up to half of the death benefit tax-free. Some policies even provide coverage of up to a million dollars, offering significant financial support for long-term care needs. One key advantage of these innovative alternatives is that if the long-term care benefit is not utilized, the policyholder's loved ones will eventually receive the full death benefit. This eliminates the "use it or lose it" mentality that often deters individuals from purchasing traditional long-term care insurance.


Conclusion: Planning for long-term care is a critical part of securing financial and personal well-being as we age. While self-insuring is the most common method, it often leaves individuals vulnerable to unexpected financial burdens. Traditional long-term care insurance has faced challenges but remains a better option compared to self-insuring. However, the life insurance industry has introduced innovative alternatives that combine long-term care coverage with life insurance policies. These options provide policyholders with flexibility, financial support, and peace of mind. By exploring different funding options, individuals can make informed decisions and ensure their long-term care needs are adequately addressed.


Remember, everyone's situation is unique, and it is essential to consult with financial professionals to determine the best funding option for your specific circumstances. Long-term care planning is an investment in a secure and fulfilling future, and the time and effort dedicated to understanding funding options will undoubtedly pay off in the long run.


Timestamped Overview:

[00:00:11] Amber Stitt Show helps with personal finances. [00:05:39] Long-term care insurance: use it or lose it. Some policies offer refunds, though. Life insurance offers an innovative alternative. [00:07:32] Product education essential for long-term care.


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