It’s the Law: Do you need long-term care insurance?

These policies pay for part or all of the cost of nursing homes, assisted-living facilities and home health care for people who can no longer take care of themselves.
Bob and Edna thought they needed it after watching Bob’s mother spend 10 years in a nursing home, running up bills that wiped out all of her nest egg, and left nothing for her heirs when she died. The couple has three kids and wants to leave something to them after they’re gone. (They asked me not to use their real names because of the personal nature of the story.)
So they bought long-term care policies in 1999, when Bob was 71 and Edna was 67. The policies would pay $130 a day toward long-term care if they couldn’t perform two of six daily activities, like bathing or dressing. The daily benefit would go up a small amount every year with inflation.
They paid $3,500 a year for the two policies, an amount that the insurance company said it would try to keep level, but made clear that it could increase.
Now Bob and Edna pay nearly $8,000 a year for their two policies, and have paid nearly $100,000 in total premiums over 16 years. Their daily benefit is up to $250. Bob is 86, uses a walker, and can’t bathe or dress without help. He qualifies for benefits.
But when their kids urged them to hire a home worker to help Bob, they said no. They grew up in the Depression and believed in self-reliance. Edna said she preferred to help Bob herself, and they didn’t want a stranger coming into their house to bathe Bob.
Their three kids asked, “Why on Earth did you pay a fortune for this insurance, and now that you qualify to file a claim, you don’t want to? Are you kidding?”
Long-term care insurance broker Dan Nicholas of Scotts Valley said it’s not an unfamiliar story. Elderly people want to hold on to their independence. He cited a woman who paid premiums for 10 years, and when she became unable to care for herself, she hid the policy from her kids.
“She was afraid that if they knew about the policy they would put her in a nursing home,” Nicholas said.
Nicholas said the insurance is not only for protecting people’s finances; it’s also about protecting relationships.
“I do what I do so your kids will still talk to each other after you’re gone,” he said, explaining that when kids become care-givers, the workload usually isn’t divided evenly.
His mother didn’t have the insurance, and when she needed care, his brother, who wasn’t employed, volunteered to care for her. He spent 24 hours a day, five days a week with his mother and only saw his wife on weekends. Eventually, the marriage broke up.
“If my mother had long-term care insurance, my brother would still be married,” he said.
Bob and Edna’s kids pushed them to get home help, and they eventually gave in. Now they have a caregiver who comes to their house three days a week for an hour, helping Bob shower and get dressed, along with other tasks.
Nicholas said he tries to steer clients away from the expensive policies that Bob and Edna bought in 1999, instead paying less for a smaller daily benefit to cover home care.
It remains to be seen if Bob will end up in a nursing home, perhaps making his expensive policy worthwhile. I asked Bob if, at this point, he thinks the policy was a worthwhile investment.
“Maybe not,” he said, “but it made me feel better to have it.”
 
– Mark Rosenberg is a financial adviser with Financial West Group in Scotts Valley, a member of FINRA and SIPC. He can be reached at 831-439-9910 or mr********@fw*.com.