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Life Plan Communities Vs. Long-Term Care Insurance

Life Plan Communities vs. Long-Term Care Insurance

As Baby Boomers continue to retire, questions about the costs associated with long-term care continue to concern them. Questions we commonly hear include: Exactly how will I pay for long-term care if my spouse or I need it? Where will we receive care? How much should I expect to pay for long-term care costs? How my care costs affect my children or my legacy when I’m gone?

Long-Term Care Insurance

Some of these questions can be addressed by long-term care insurance. Long-term care insurance can provide a pool of assets you can use in various environments—such as the home, assisted living facilities or skilled nursing homes when your health deteriorates to a point where mobility or mental continence no longer permits you to care for yourself independently.

The problem for new long-term care insurance shoppers, however, is that the number of contracts and types of benefits have been significantly reduced as many larger insurers have withdrawn from this market. Retirees may also find that the long-term care insurance underwriting process has become much more conservative. For older retirees, age and health factors may preclude them from getting coverage.

Current policy holders are also experiencing new challenges. Significant premium increases on in-force contracts have either compelled some seniors to modify coverage by reducing benefits, or to pay more out of pocket for the benefits their policies were originally designed to provide.

Life Plan Communities (Formerly Known as Continuing Care Retirement Communities)

An alternative to buying long-term care insurance is the option of entering a Life Plan Community. While Life Plan Communities have different cost structures, they effectively answer the question of where you’ll receive care. Retirees typically enter a Life Plan Community when they are still capable of independent living, and they can enjoy the social aspects the community provides. The Life Plan Community cost may include a significant up-front entry fee (which is normally financed through the sale of a primary residence) and an ongoing monthly fee.

Depending on the type of Life Plan Community contract into which you enter, the cost of transitional care and accommodations (from independent living to assisted living to skilled nursing) can remain relatively predictable. Unless you are willing to pay more in upfront entry fees, the investment in the community may be non-refundable. That would limit the amount of money you’d be able to pass on through your estate. Also, while the Life Plan Community does provide housing, it is technically not a real-estate contract.

Which is Better?

The answer to this key question depends both on your qualitative desires and your financial means. A long-term care insurance policy provides benefits only when you need them, and provides some flexibility about where you’ll receive care. The Life Plan Community, on the other hand, provides a lifestyle and living accommodations for anyone willing to leave their home and commit to a large up-front investment.

Financially, the best outcome for a long-term care insurance policyholder would be to pay the lowest-possible premium and go on claim for a long period of time collecting benefits. However, that does not represent the best “quality of life” outcome. On the Life Plan Community side of the equation, you risk forfeiting your large investment if you enter a Life Plan Community with a non-refundable contract and pass away within five years or less.

The Best of Both Worlds?

If you already own or are thinking of purchasing long-term care insurance, it may be advantageous to coordinate the benefits of the policy with a lower-cost contract at a Life Plan Community. For example, a care community may offer a modified or “fee-for-service” contract that has a lower (or no) entry fee. If your ongoing monthly fees rise when you move from independent living to a more expensive level of care, you could tap your long-term care insurance policy benefits as your healthcare costs go up.

Occasionally it is not an “either/or” decision between a Life Plan Community and long-term care insurance. Instead, the optimal solution may be the coordination of the right Life Plan Community contract with a long-term care insurance policy with an appropriate amount of benefits.

Weigh Choices Carefully

As you can see, it’s important to spend time understanding the costs and risks associated with long-term care. Life Plan Communities and long-term care insurance both provide good ways to manage and transfer some of that risk.

Of course, some retirees may have sufficient assets to retain, or “self-insure,” against long-term care risks. However, if you are considering paying for help managing future health care costs through a Life Plan Community or long-term care insurance, be sure to talk about your options with a knowledgeable, objective professional like your Wealth Advisor.
Important Disclosure Information
Please remember to contact RegentAtlantic if there are any changes in your personal or financial situation or investment objectives for the purpose of reviewing our previous recommendations and services, or if you wish to impose, add, or modify any reasonable restrictions to our investment management services. A copy of our current written disclosure statement discussing our advisory services and fees is available for your review upon request. This article is not a substitute for personalized advice from RegentAtlantic. This article is current only as of the date on which it was sent. The statements and opinions expressed are, however, subject to change without notice based on market and other conditions and may differ from opinions expressed in other businesses and activities of RegentAtlantic. Descriptions of RegentAtlantic’s process and strategies are based on general practice and we may make exceptions in specific cases.

RegentAtlantic does not sell insurance products. Please contact an insurance professional of your choosing prior to purchasing any insurance producing, including those mentioned in this article.

Important disclosure information

Please remember that different types of investments involve varying degrees of risk, including the loss of money invested. Past performance may not be indicative of future results. Therefore, it should not be assumed that future performance of any specific investment or investment strategy, including the investments or investment strategies recommended or undertaken by RegentAtlantic Capital, LLC (“RegentAtlantic”) will be profitable.

Please remember to contact RegentAtlantic if there are any changes in your personal or financial situation or investment objectives for the purpose of reviewing our previous recommendations and services, or if you wish to impose, add, or modify any reasonable restrictions to our investment management services. A copy of our current written disclosure statement discussing our advisory services and fees is available for your review upon request.

This article is not a substitute for personalized advice from RegentAtlantic. This article is current only as of the date on which it was sent. The statements and opinions expressed are, however, subject to change without notice based on market and other conditions and may differ from opinions expressed in other businesses and activities of RegentAtlantic. Descriptions of RegentAtlantic’s process and strategies are based on general practice and we may make exceptions in specific cases.

RegentAtlantic does not provide legal or tax advice. Please consult with a legal and or tax professional of your choosing prior to implementing any of the strategies discussed in this article.

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