Is Long-Term Care Insurance Worth The Cost? (2023)

Healthcare costs are perhaps the biggest uncertainty in retirement.

A long-term healthcare need can wipe out retirement assets. With the rising cost of Long-term care insurance, is it still worth the cost?

Long-Term Care Insurance Worth The Costs


Full transcript:


Alex Okugawa & Anthony Saffer

Alex Okugawa 0:00
healthcare costs are perhaps the biggest uncertainty in retirement, and a potential long-term care health event can wipe out your retirement assets. Today, we’re going to discuss a simple framework to help you understand which types of insurance you may need, including long term care insurance, what’s changed, and the long-term care insurance environment over recent years. And if you do choose to pursue a policy, how can you make sure that you don’t waste your money? Stay tuned. Hey, there, it’s Alex and Anthony, from One Degree Advisors, and we help you gain confidence in your retirement. So, Anthony, people working hard for their retirement healthcare is a significant wildcard, not only all throughout life, but especially as you get older, and a long-term care health event can really wipe out your savings. But long-term care insurance is expensive. And honestly, people don’t want to waste their money on it. If it’s not worth it.

Anthony Saffer 0:53
Yeah. And to clarify normal health insurance, it’s often covered by Medicare, and retirement that that’s different long-term care insurance, which you can get to cover daily living activities. That’s, that’s what we’re talking about here.

Alex Okugawa 1:07
Got it. And like, as we mentioned earlier, people don’t like to pay for insurance. So how do people know if it’s worth it? Or not

Anthony Saffer 1:14
yet, let’s put a simple framework up here on the screen. So what you’ll see here, well, let’s start with the lower right where you have, when you have an event that’s potentially low impact, meaning it’s not going to cost a lot of money if something happens, and it’s unlikely to occur. So think about people, who have an old beat-up car, who often strip the auto insurance coverage of any like collision coverage, because something happens that the car is not even worth replacing at that time. It’s something like that you’re not going to necessarily get insurance. If you look at the low impact and likely to occur. Upper right there. That’s where generally, you know, insurance is not needed for that sort of thing. Now, I do have a friend, he’s he hauls equipment, he loses his cell phone all the time, he breaks it, and he gets cell phone coverage and insurance. Most of us don’t, most of us don’t get it, it’s not worth it. Now, let’s look at high-impact and unlikely-to-occur lower left, this is actually the sweet spot for insurance. That’s where you insure your home against a fire. It’s unlikely to occur, but it’s catastrophic. Even getting term life insurance, again, can be catastrophic. But it’s unlikely to occur during that term. Yep. And then you have the upper left, which is high impact unlikely to occur. A lot of times people think well, that’s why I want to get insurance. It’s it’s likely to occur. But this is where Long Term Care fits in.

Alex Okugawa 2:37
Over half of people that turn age 65 will need long-term care insurance at some point and the remaining years of their life. So really, what we’re looking at here is a one in two chance that you’re going to need that and for a married couple, those are some pretty high odds that you’ll need care. Genworth does a cost-of-care survey every single year. And just to give folks some perspective, in San Diego, if you need a semi-private room, in a facility, you’re looking at roughly $9,400 a month. And let’s say I kind of go to a facility I’d like to stay home, a lot of people prefer to do that. Well, if you do, you’re looking at home care, which probably is going to cost you around $34 an hour. So those are some pretty steep prices for something that is very likely to happen at some point in your lifetime. Yeah, and we’ll link

Anthony Saffer 3:25
to that Genworth cost of care survey. It’s really comprehensive and quite helpful for people in different areas. But it’s because of that, that high likelihood, that high cost that makes the insurance so expensive. And so what people are finding is that, hey, if I put all this money into insurance, even if I have a potential need down the road, I’m getting just a lot of my money back. Now, don’t get me wrong, if you have the insurance and you have a need, you’re gonna be happy that you had it. It’s just a high price to pay. So here’s what’s changed, though, over the years. Previously, long-term care insurance because this is really only a few decades old, which is relatively new, is that it was really priced very low, almost like it was an unlikely event to happen. Yep. And it was priced at that low price. So so people that got insurance way back, they’re happy they have

Alex Okugawa 4:16
insurance companies completely underestimated how many people were going to go on a claim to how much it was going to truly cost. And then three, how long people would stay on the claim. I mean, I have clients who will ask me about their policies and say, you know, do I continue to pay this and I’m like, people would kill to have your policy. And the reason why is that they got it so many years ago. So when the premiums are relatively inexpensive, and the benefits are rich for what they’re paying. Nowadays, it’s not so clear cut nowadays, it’s not black and white. The benefits aren’t as rich. They’re a lot more pricey.

Anthony Saffer 4:49
Yeah, and we’re not against long-term care insurance, but you definitely want to do your homework. And here are two things if you’re interested in pursuing long term care insurance if you want to say I want to do my homework on it. There’s two things Things that we would would advise number one is, is run it through the context of your financial plan. And this is where we, where we really do help people. You don’t want to make this as a standalone decision, a financial plan can factor in, well, what happens if I do have insurance? How does my projection look? What if I don’t have insurance? Can I potentially self-insure without? Well,

Alex Okugawa 5:21
I was just gonna bring up self insure. Because a lot of folks don’t want it, they bring up self-insurance. And the question is, well, can you even self-insure? And that’s what a good financial plan can do? And help answer.

Anthony Saffer 5:30
Yeah, and then the second thing is, is make sure you get good advice. So So part of that comes with having a financial plan. That’s where we help people look at in the context of their plan, how much coverage should you have, what type of insurance because there are actually different kinds to get. But then we also work with specialists that know the long-term care industry in and out, they if a client says, Well, I have this particular health event in the past, they can say, well, don’t apply at this particular company apply over here, because they’re more favorable towards that. Really look at the end.

Alex Okugawa 6:02
And just like you said, sometimes it is more art than science. And sometimes it can mean getting a policy that maybe only covers part of it. So you have a little bit of a hedge there. It really all depends. We also made a previous video where we address the question, do I need long term care insurance folks can watch that above. Once again, this is Alex Ogawa with One Degree Advisors. And if you’d like to learn how we can help you with your retirement, visit our website at one degree

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