The title of this blog probably induced an immediate reaction. If you’re like most of our clients, it was probably not positive. If you own long-term care insurance, you’re probably frustrated that the carrier has come back to you (perhaps more than once) and asked you to agree to higher premiums for the same coverage, or the same premium for lesser coverage. If you don’t own long-term care insurance, it’s probably because you figure you will never need it, you consider it too expensive, or you find the entire subject (actually needing it) just too distasteful to consider.

We’d like to share with you some of our observations about long-term care insurance.

We’ll start with what long-term care insurance is. This form of insurance is designed to pay the costs of care that are not covered by health insurance or Medicare. Benefits are triggered if an insured is unable to perform two or more of the six activities of daily living (ADLs), such as dressing, bathing, eating, toileting, continence, transferring (getting in and out of a bed or chair), and walking.

As Americans live longer lives, many of them are reaching a point where they need assistance with these basic activities. The federal government projects that about a quarter of Americans turning 65 between 2015 and 2019 will need to up to two years of such care. Twelve percent will need two to five years of care, and fourteen percent will need more than five years of care (source: The Wall Street Journal).

And this care is expensive. The Aging and Disability Resource Connection of Oregon reports that a semi-private room in a nursing facility cost $265 a day (or $8,000 a month) in the Portland metro area in 2015. An assisted living and residential care facility cost $3,895 a month. An in-home care worker was $23 per hour. Adult day care services were $85 per hour. Those requiring more intensive care (e.g. memory care) can pay for more.

As Certified Financial PlannerTM certificants, we have a responsibility to explore with our clients their potential need for long-term care. We encourage them to look at their family history. Do they see family members (parents, aunts, uncles, grandparents) who need helped with these basic living activities? They also need to evaluate their own health. Are they overweight? Do they have health conditions? Are they active?

From a planning perspective, we see a variety of client circumstances. Some of our clients have a distinct family history in which one or more members needed care for more than a short period (3-6 months). These clients should consider that they, too, may need care later in life. Other clients have no family history of members needing care or, if they did need care, it was for a very short period of time before death. These clients, assuming they are in good health and actively take care of themselves, can reasonably assume that they will require little, if any, care later in life.

For those who think they may one day need care, they need to evaluate the financial risk. Do they feel they can pay for care from their own resources? If so, then perhaps they can forgo buying long-term care insurance. If not, then they should seriously consider buying it.

Some people who are concerned that they may need help with the basic living activities and who have the ability to pay for such care should it come to that, may still wish to consider buying long-term care insurance. They may wish to transfer this risk to an insurance company in order to protect their assets for their children and grandchildren.

As you probably know, Springwater does not sell long-term care insurance (In fact, we do not sell any financial products). We do have an insurance license, so that we can provide our clients with guidance on various personal insurance products (health insurance, life insurance, disability insurance and long-term care insurance).

If you have not yet taken the time to seriously consider that you may one day need help performing the basic activities of daily living, we strongly encourage you to do so. At our upcoming client event on September 18, there will be an educational session on long-term care insurance. Please plan to attend, and consider bringing a friend.

PLEASE SEE important disclosure information at www.springwaterwealth.com/blog-disclosure/.