Making sure that aging parents have the care they need is a responsibility that weighs heavily on adult children.
Today, it’s estimated that 52% of people turning 65 will need some type of long-term care in their lifetimes. Of that estimated population, 58% of women will need long-term care, as will 47% of men. The costs can be staggering. According to Morningstar, the national median cost for a private room in a nursing home was $97,455 in 2017. Fortunately, there’s an option that can help adult children obtain long-term care benefits to cover this type of expense, and access those benefits at a lower cost.
While the wealthy self-fund and lower-income families can depend on Medicare, families with assets (although not enough to fund several hundred thousand dollars in long-term care) face difficult choices. Long-term care insurance is expensive and this is particularly true for single women. Since that their life expectancy is greater, women often find themselves the surviving partner in a relationship.
Given this greater life expectancy, women are also much more likely to use significant long-term care benefits. Since actuarial studies show that individuals in committed relationships tend to need less long-term care for shorter periods of time, many companies offer discounts on long-term care coverage to couples. By and large, the definition of a “couple” includes two people joined in marriage, a domestic partnership, or common law marriage as recognized in their state of residence. When women lose the benefit of coupledom, their long-term care insurance skyrockets in price.
One key to savings on long-term care insurance is a product that offers a much broader definition of “couple.” There is one innovative product on the market that allows any two individuals with an insurable interest in each other and an age difference no greater than 25 years to benefit from a discount similar to that offered a couple. The product can be used by any adults who meet the age differential requirement and can demonstrate an insurable interest.
This product is the perfect solution for an adult child who wants to provide for an aging parent. Take, for example, a man of 50 who would like to allocate $10,000 to an annual premium for a long-term care policy that will cover his 74-year old mother. With the “couple’s” option, the insurable age on the policy will be 69. Both mother and son will be guaranteed a $5152 monthly benefit for each of their lifetimes. Should neither mother nor son use the monthly care benefit, the second member of the couple to die (most likely the son) would leave a $128,816 death benefit to his heirs.
Were the son to purchase a long-term care policy for his mother alone, paying the same $10,000 annual premium, her monthly care benefit would be $4017. This is $1135 per month less than the monthly benefit paid to both mother and son for their lifetimes under the joint policy.
The adult child who wishes to fund this type of policy can opt to pay a single premium resulting in a set amount of coverage. This can be funded with a lump sum payment, or the insured individuals may propose a monthly payment for a specified number of years. In this case, the insured parties state their budget and receive coverage that is consistent with the desired payment. Alternatively, the insured parties may state the amount of coverage they would like to have, and the premium will be determined on that basis.
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