How Long Term Care Insurance Can Protect Your Assets

It is a widely believed notion among people that Long Term Care Insurance is only good for receiving care when you are older or in case anything happens to you when you are not able to do your daily chores.

Yet one of the most important values of Long Term Care Insurance has not been clearly understood (maybe has not been accepted?) among most people or maybe even among the insurance professionals: Long Term Care Insurance goes beyond just providing care, in reality it goes as far as protecting your assets, and may even go far enough to protect your income.

In order to understand the impact of Long Term Care, we should first consider its cost: according to 2008 US Department of Health and Human Services Statistics average Long Term Care Cost per year is as follows:

1. Nursing Home Care is about $73,000.00
2. Home Health Care is about $70,000.00
3. Assisted Living Care is about $32,000.00

Now if you can imagine a retired couple with after tax income of about $73,000.00 per year, it becomes quite obvious that the economic impact of even one of the spouses going into a Long Term Care situation can be quite damaging to the family’s economic condition. Consequently, not having Long Term Care Insurance will only leave about $40,000.00 per year the best scenario, the worst scenario would be leaving virtually no yearly income at all.

However, this wouldn’t be the only economic impact of Long Term Care! Since the couple’s yearly expenses are related to the initial yearly income, which is $73,000.00, even the minimum impact of Long Term Care scenario will create a substantial need for more income for the couple to sustain themselves. This may actually create a bigger impact because in order to sustain themselves, the couple would have to start liquidating their assets such as investments, IRAs, etc. This in turn will result in paying more taxes, not to mention depleting retirement assets.

Consequently, if a Long Term Care situation is prolonged for more than a year, the family’s assets upon which income is based will be rapidly depleted.

The purpose of Long Term Care Insurance is not only to get the care you need in case of a Long Term Care situation, it also serves a very important purpose of protecting your assets as well as your income.

There are actually more ways that Long Term Care Insurance can help protect your assets and consequently your income; such as State Partnership Program. Even though this program has certain requirements, it protects your assets dollar-per-dollar equal to the amount of money you have within your Long Term Care Insurance. For example, if you have a daily benefit of $300.00 for a 3 year-care, the pool of money available for your care is $300.00 x 3 years x 365 days per year = $328,500.00. As a result, if you start liquidating your assets for your long term care, $328,500.00 worth of your assets (stocks, bonds, your house, etc) will be protected from being liquidated.

In summary, the importance of Long Term Care Insurance, particularly as the baby boomer generation is retiring rapidly, has become obvious, and further more due to this importance, designing your Long Term Care Insurance suitable for your very personal needs with a Long Term Care Specialist became almost inevitable.