Maybe you’ve thought about long term care, and you’ve decided that you have enough money tucked away to take care of it when it happens to you. We insurance nerds call that “self-insuring.” You’ve decided that you’ll rely on your own assets to protect you, and that is a perfectly valid approach – as long as you realize what that means.
For instance, did you realize that a year in a private nursing home room in Maine right now costs a little bit over $100,000 on average? That’s a lot of money. Now maybe if you’re single, and you’ve got some cash tucked away, and you don’t mind selling your home, you can cover this and not worry about it. Again, that’s perfectly okay – it’s your money. But what if that’s not the case? What if you have a spouse who still needs an income? What if you have a family you wanted to give that house or money to? You need to understand that the financial impact that long term care can have is significant, and that it may impact more than just you.
If you are determined to self-insure, you need to make sure that you have money set aside that’s tagged for nothing but long term care. It can’t be the money your spouse is going to need to live on. It can’t be the money you use to pay for your grandson’s first year of college. It can’t be the money you’re going to use to replace that old Buick that’s sitting in the driveway. Your long term care money has to be protected, so it will be there when you need it. If you use it for something else, you’ll be in a hard spot when you do need LTC services.
You can do this by simply leaving the money in a CD or a savings account. It may be part of your “bigger” accounts, but if so, make sure anyone who may be in a position to spend that money (powers of attorney, etc.) knows about your LTC fund. You may want to consider using one of the new “asset-based” LTC insurance plans that use a lump sum to fund a much larger benefit pool using your money as the base. They let you keep control of the money, so you haven’t lost it if you need it later. Wherever you put that money, make sure that it’s preserved for your LTC needs.
Self-insuring is a valid approach to planning for long term care, and for many people, it will work. But before you decide that it’s the right approach for you, you must consider the impact it will have on those around you, and that the money will actually be there when you need it. As you know, I’m a phone call away if you want to share your thoughts. Kerry Peabody, Clark Insurance