Long term care is the elephant in the room few will address
According to LongTermCare.gov, 70% of Americans 65 or older will require some kind of long-term care in their remaining years, With the median price of assisted living costing $4,500 a month and nursing home care at $9,000 a month few can absorb the financial impacts of a chronic illness or acute health emergency. While long-term care (LTC) insurance covers many of these expenses only 3.3% of 7.5 million Americans have long-term care insurance policy.
Long-term care insurance is designed to cover the costs associated with extended care, including in-home assistance, nursing homes, and assisted living facilities. This type of insurance provides a safety net for individuals who may require prolonged care due to age-related illnesses, disabilities, or chronic conditions.
The American Association for Long-Term Care Insurance (AALTCI) recommends individuals shop for long-term care insurance between the ages of 52-64 when premiums are less costly and serious health conditions typically are not present. The benefits of long-term care insurance include preserving personal assets, reducing the burden on family members, and ensuring access to quality care. It offers individuals the freedom to choose the care setting that suits their needs, whether it’s receiving care at home or transitioning to a care facility.
The typical potential reverse mortgage client will find LTC insurance premiums would place a significant burden on their monthly cash flow or are simply unaffordable. Yet, the financial exposure to the costs associated with extended care is significant and could wipe out one’s retirement nest egg.
Long-term care risks can be addressed with a reverse mortgage in one of two ways: (1) using the loan proceeds to pay for care as needed, or (2) financing LTC insurance premiums. Few reverse mortgage originators are well-versed in the complexities of long-term care insurance therefore finding a seasoned LTC insurance professional is crucial to better understand how such policies function.
While reverse mortgage loan proceeds can be used to purchase LTC insurance one major risk should always be addressed- the loan’s occupancy requirement. If the policyholder is the sole borrower on the reverse mortgage relocation to a care facility for an extended period of time could trigger the loan becoming due and payable.
Reverse mortgages and long-term care insurance are two financial options that can provide peace of mind and security for seniors as they plan for their future. While reverse mortgages offer a way to access home equity and supplement income during retirement, long-term care insurance safeguards against the high costs of extended care. It’s essential to carefully evaluate individual circumstances, consult with professionals, and understand the terms and conditions of each option. By doing so, seniors can make informed decisions that align with their needs, ensuring a financially stable and worry-free future.
-Shannon Hicks
