Broker Check

Long Term Care- You May Not Need a Policy, but You Need a Plan

January 12, 2017

When people imagine retirement, they tend to conjure images of themselves as being healthy, happy, and fully capable of doing what they want to do. However, as people live longer and longer, we know that sometimes our bodies start to fail before our minds do, or that our minds start to fail before our bodies do. None of that is pleasant to talk about, but it is even less pleasant to confront this scenario without a plan in place.  

A long-term care plan is just that: a plan. A long-term care plan is not necessarily an insurance policy.

A properly designed plan is a combination of emotional, physical, and financial decisions that you have thoughtfully made with your family and other caregivers. You don’t want to make the plan one surprise at a time, especially if you will one day say, “We have no choice but to…”

As a financial planner, my purpose in discussing long-term care with my clients is to help them understand whether they have the resources to be able to handle a long-term care need, if it arises. That means that we ask some questions that may have never been asked before:

  • Long-term care means that there is suddenly a brand new lifestyle, and it’s very expensive. How will you pay for it? 
  • You may have a condition that creates a long, slow decline in your ability to care for yourself. What will you do when you are so frail and fragile that it is no longer safe for you to be at home? 
  • If you are married, how do you care for the person left at home? Does she or he need to adjust living expenses to be able to pay for a spouse in long-term care? 
  • If you are single, who is designated to help you make decisions and transitions so that you are safe and well cared for? 
  • Is it important to you to protect your family financially?


We have plenty of clients that have a long-term care plan in place: we have reviewed their assets and determined that they have the resources in place to handle potential long-term care expenses. We know the family members with whom we will work to ensure that the plan is executed. These clients do not have long-term care policies in place.

Alternatively, we also have plenty of clients who don’t have the financial or personal resources in place to handle a long-term care situation. For other clients, it may be more important to them to preserve assets for the next generation. In either case, a long-term care insurance policy or asset may be a good fit to answer their needs.

For those who don’t believe that they have ample resources to pay for possible long-term care needs, there are generally four solutions available:


  • Long-term care insurance policy:  A pure long-term care policy requires ongoing monthly premiums (which may increase), so it needs to be one that you can afford in your cash flow. There is no cash in the policy, so it can lapse if you don’t pay the premium.
  • Hybrid insurance policy: These insurance policies build up a cash component which can be leveraged for your future long-term care needs. Essentially, you can use the funds for long-term care, or your beneficiaries will receive the death benefit when you die.
  • Life insurance policy with a long-term care rider: A cousin of the hybrid insurance policy, this is a cash-based life insurance policy designed to pass on to your beneficiaries. The rider allows you to accelerate the death benefit for long-term care expenses if needed. The rider can be exhausted, so it may not cover all of your expenses.
  • Long-term care annuity: This is a deferred fixed annuity which also provides leverage to use the cash balance for long-term care needs. For example, a $50,000 annuity might be able to provide $100,000 in long-term care expense coverage.


There are pros and cons to each of these types of long-term care solutions, and there is not a “one size fits all” answer. I highly recommend that you become educated about the different types of programs, as well as the features you can choose for each policy, over a period of time so you can make a thoughtful decision for you and your family.

Also, all of these programs require underwriting, so your working status, as well as your health and lifestyle will be reviewed: history of tobacco use, disability, cancer, diabetes and medications. Underwriting can be challenging for these policies, and it is possible to be denied.

It should be noted that Medicare will not pay for skilled care (in a facility) beyond the 100th day, and there are many caveats to what they pay for during that time. Also, Medicare only pays for certain types of intermediate care (occasional, less specialized care), and does not pay for custodial care (activities of daily living).

Most long-term care is custodial, so this should be a key consideration for whether you should buy an insurance policy or not. Our practice is over thirty years old, and we have seen many families go through all phases of life. With people living longer, we also see situations where our clients are healthy overall, but they lose energy as they age. A long-term care policy can also provide light housekeeping, meal preparation, and laundry services for your support.

Your decision about how to prepare for possible long-term care expenses is like every other choice in your financial plan: it is unique to you. I work with multiple families where the spouses choose different answers for their future needs due to their health factors, life expectancy, or specific vision of their future care. If you are ready to review your options, please contact us at


Although this information has been gathered from sources believed to be reliable, it cannot be guaranteed. This material is intended for informational purposes only, and is not intended to be a substitute for specific planning advice, as individual situations will vary. Long-term care insurance policies may contain exclusions and limitations.