Why do people buy Long Term Care Insurance?  We set out to discuss this topic around the holidays with some year end financial planning, when many of our clients are with family and thinking about the future.

Christmas is a time of festive family gathering where we see new and old friends and of course family.  You’ll see parents, grandparents, aunts and uncle who many of them may not be in such great health.  It’s a time that reminds us of the cycle of life and that one day we too will be old and may need help living out our last years.

The end of the year is a good time to reflect back and get affairs in order for next year, including planning for your financial future.  With tax credits in some states and tax deductions available to some on Federal Taxes, a purchase in 2014 vs 2015 can extend tax deduction benefits to another year’s income.


Studies Have Shown It’s About Peace of Mind

While many that buy Long Term Care Insurance could self-impoverish themselves strategically and apply for state assistance, this is not a real plan, and for a baby boomer facing 20+ years of retirement, government help is a moving target with its own set of challenges and uncertainties.  The only way you will be able to get the government to pay your nursing home bill is if you spend down all of your assets to essentially zero.  This back-of-the-mind worry that you will be impoverished during your last years, having to ask your kids for physical or financial help, is completely preventable.  Long Term Care Insurance is simply a tool you can use that will give you that peach-of-mind that you are taken care of so that you can enjoy spending time with your family.

People buy this because of the way it makes them feel.  Knowing you’ve got a plan and can focus on life’s next challenges carries immense value to many.  Procrastinating is human nature, but at some point many decide it’s time to move forward, before another rate increase due to age or state changes makes the long-term cost of owning a policy even more expensive.

You’re As Healthy As You’ll Ever Be

We find that almost 40% of applicants who feel and appear healthy are still declined for coverage because the companies are very risk-averse these days.  The best time to buy a Long Term Care policy is now – before you become unable to buy protection at any cost.

Fact: LTC Tree sold it’s first policy in 1998 and back then the approval rate was 76.3% and the average age of a buyer was 66.2 years old.  Today the average approval rate is just 59.8% and the average age of a buyer is 58.1 years old.  The bottom line is that this younger people are buying this insurance now and it’s harder to get.

How To State The Conversation With That Loved One?

  1. Be direct.  Honesty and NOT beating around the bush is the best path because it shows your family member that you care about them and you simply want to have a plan to ensure they are taken care of.
  2. Talk only of their needs and concerns.  Kids often will make the mistake of mentioning to their parents that they need Long Term Care Insurance to protect their inheritance or make it so obvious that their parents catch on.  It’s not your money!  When the focus is on ensuring the best care for the loved one first, the inheritance if any left will simply be a blessing.
  3. If they are gun shy, tell them just get a small plan just to hedge the risk a bit.  Having a small Long Term Care Insurance policy is better than not having anything if they balk at getting a normal plan.

Make this Christmas season fixative but yet productive with these year end financial planning tips on how to bring up the subject to your family.