There’s more than one way to skin this expense
By Carl “Doo Dad” Cease
We’re all getting older. At some point you, or someone you know, will need help in the aging process. It may be a simple case of arranging house cleaning, 
medication administration and yard work or a more complex case where dementia is a factor. The two overriding questions are “Who can help us?” and “How are we going to pay for it?” The “who can help us” is a topic for one smarter than I, but the “how are we going to pay for it” we can tackle right now.
A month ago my phone rang, and it was a client in upstate South Carolina. I’ve known him for years — watched his business grow, his marriage suffer and dissolve and his children make their way through elementary school. The first words out of his mouth were “I need to talk to you about long-term care insurance.” After a few questions, I understood that his problem was how to pay for long-term care (LTC) expenses for himself — at the least possible cost. And we solved his problem with a life insurance policy. “How does a life insurance policy help with long-term care expenses?” I hear you ask. “Very well” is my response. Here’s how it works.Let’s pretend you’re 45 years old and want to avoid burdening your children as you age. You purchase a $250,000 whole life insurance policy that has an LTC access rider attached to it. And yes, I know there are talking heads that despise whole life insurance. Stay with me, and make your own informed decision.
The LTC access rider allows the policyholder to accelerate the payment of a portion of the death benefit to help pay for covered LTC expenses. It pays for both home and facility care on a reimbursement basis. Let’s put numbers to this for clarity. You purchase the policy at 45, and 30 years later you need help three days a
Listen to our interview with Carl Cease on ways to pay for long-term care.
week after you take a fall. The three days each week will cost $1,000 a month and allow you to stay in your home safely and securely. After 14 months, your strength and health are such that help is no longer needed.
- Initial death benefit purchased $250,000
- Funds used during 14-month period $14,000
- Remaining death benefit $236,000
If you need additional care, perhaps in a facility setting, the process is the same. If you don’t need the remaining $236,000 for care, that money passes to your beneficiary. Note that this is a very simple example and does not consider the cash value of the policy, any paid-up additions through dividends and a host of other considerations. Specific insurance companies structure their riders and the guidelines to access that money differently, so it pays to ask questions.
Next time we’ll talk about traditional long-term care insurance and how it may be — but probably isn’t — the best financing mechanism for care.
