Most people think about risk management in the short term – what can I do to protect myself from a possible disaster or negative event in the near future? While it’s important to have a short-term plan, you also need to consider long-term risks. What could happen down the road that could have a major impact on your life or business?
We’ll discuss how you can prepare for those possibilities, What steps can mitigate potential risks, and how you can reduce the chances of something bad happening and minimize the damage if it does. Taking care of your wealth management.
What’s Risk Management?
In financial planning, risk management is concerned primarily with the long-term financial impact on a family due to unforeseen events such as disease, disability, or death. There are many considerations for long-term care risk management when building a comprehensive plan for retirement or your children’s inheritance. The cost of living facilities can be crippling, so you’ll want to consider funding sources that can help pay for care if necessary. Insurance programs are commonly used as well.
Importance Of Having Long-Term Insurance
A well-constructed financial risk management plan is vital to a family’s security because it is impossible to predict every possible future event with absolute certainty. Risk management focuses on the most likely scenarios, and plans are built that take these situations into account. For example, many people have life insurance if they die; others have disability insurance for the same reason, and almost everyone has health insurance for themselves or their families.
Few people have long-term care insurance (LTCI), which replaces one’s income in case of a serious illness or injury that renders them unable to work for an extended period. According to the Centers for Medicare and Medicaid Services, this is an oversight because approximately 80% of those needing long-term care services have no funds set aside to pay for them.
LTCI Policy Limits
Because LTCI can be a large purchase, you’ll want to consider funding sources that could help pay for care if necessary. You should also be aware that an LTCI policy limits how much it will pay per day or month. Even so, the payments can still be substantial over time. For example, you can expect monthly payments of $4,000 for a $1 million policy for someone in their 60s.
If you have a home equity line of credit (HELOC), you may have a few additional options to tap into if you can borrow money. Keep an eye on your expenses and your budget so that you don’t get in over your head if illness suddenly leaves you without the means to pay out of pocket.
Plan For The Costs
If you expect to live longer than average, you may want to limit your risk by having enough income in a retirement account so that your estate will have adequate funds to pay for the costs of care. Do not take this in isolation, however. Ensure you have adequate insurance if you know that long-term care needs will be costly. Suppose other basic living expenses must be paid each month, whether for yourself or an aging parent, be prepared to do so.
The reality is that most people will need some form of long-term care support at some point in their lives. This wealth management can be extremely helpful to plan for this so that your family doesn’t suffer financial hardship.
Long-Term Care Insurance Options
There are several ways to obtain your long-term care insurance coverage. It can be purchased from an insurance company, a direct sale agent, or the government. Below we’ll discuss all three of these options.
Buying Long-Term Care Insurance From An Insurance Company
When buying long-term care insurance from an insurance company, you can ask for a free quote. The life insurance companies that offer long-term care policies often have dedicated departments and a toll-free number you can use to request coverage. Even if they don’t mention long-term care insurance when quoting your life insurance, you can still call back later and ask to have it included in the policy.
Buying Long-Term Care Insurance From A Direct Sale Agent
Direct sale agents are life insurance and annuity salespeople who represent multiple companies. They typically earn their income through sales commissions, so their goal is to sell as much insurance as possible. You can request a quote from an independent agent or a direct-to-consumer insurer to get an idea of what coverage would cost you.
Long-Term Care Insurance Through The Government
Sometimes the government will offer long-term care insurance itself. You can buy a policy through Medicare or Medicaid. These are good options if you have limited assets and need government benefits to cover your care. It would help to explore additional insurance policies to supplement these basic plans. However, the payments will be paid directly to you and your family and may be used.
Dependent on the type of plan that you choose, your benefits may include:
Medication Management: Long-Term Care Insurance plans may pay for your medication management. This includes prescription drugs, doctor-prescribed over-the-counter medicines, and even vitamins. Medication can be expensive, especially if you take several different medicines every day.
Skilled Nursing Services: Long-Term Care Insurance plans can pay for your skilled nursing services. This will include wound care, dressing changes, bathing, and grooming services. The amount of coverage you can purchase will vary by plan.
Supervised Activities: Long-Term Care Insurance plans can provide for supervised activities that are necessary for the health of your loved one. This can include exercises and games. It is important to understand what the insurance company covers and what is not covered when purchasing this type of coverage.
Home Health Care Services: Long-Term Care Insurance plans can pay for your loved one’s home health care services. You will likely receive reimbursement for all non-skilled nursing and related medical care provided to your loved one at home. The amount of coverage you can purchase will vary by plan.
Social Security Benefits: Long-Term Care Insurance plans will provide a monthly payment to the Social Security Administration so that survivors’ benefits can be paid out if you are eligible for them.
What To Look For In A Long-Term Care Policy
There are several aspects of an insurance plan that you must think about before finalizing a purchase. These include:
The Plan’s Cost: Long-Term Care Insurance plans vary in their costs depending on their overall coverage, the age of the buyer, and the type of plan that you choose. The younger you are when purchasing a plan, the less expensive it will be. All policies have different rates, so it is normal to research plans to find one that fits your budget and financial needs.
The Plan’s Coverage: Most people who purchase Long-Term Care Insurance plans do so because of their advanced age. As you get older, your health will most likely decline, and you will need help with things that you used to be able to do on your own. Your plan should cover all of the expenses associated with long-term care so that they can be paid out directly to you and your beneficiaries.
The Plan’s Cost Sharing: Long-Term Care Insurance plans will have varying costs. If you decide to purchase one that offers the lowest cost, you will have to pay for everything you receive in the policy. This is called cost-sharing. You must completely understand the costs associated with your plan to make an educated decision when purchasing it.
The Plan’s Dependency Objective: Your Long-Term Care Insurance plan must have an objective that states what it is trying to accomplish. This could be to provide for a living arrangement or immediate care needs. It would help if you chose a policy that fits the objectives that you need from your plan.
The Plan’s Flexibility: Long-Term Care Insurance plans must be flexible to fit your specific needs. There are options such as inflation protection and accelerated benefits, which can be added to other plans that can save you money if these features are needed. These optional features will increase your costs, so it is important to understand what they are before purchasing a plan.
The Plan’s Guaranteed Renewability: A few Long-Term Care Insurance plans do not offer guaranteed renewal. If you have changed jobs or lost your job, they will not be able to continue providing you coverage. It is important to purchase a plan that will provide you with the coverage you need.
The Plan’s Limit on Benefits: Because Long-Term Care Insurance policies cover all expenses associated with long-term care, it is important to understand exactly how much your policy provides. All plans have limits, so it is important to make sure you know your plan’s limit.
The Plan’s Living Need Objective: Long-Term Care Insurance policies will have an objective that they will try to accomplish while still living in your home. This includes providing for the care and management of daily living activities such as eating, bathing, dressing, toileting, etc. It is important to choose a plan that fits your needs here.
Find The Right Long-Term Care For You
At Nesso Wealth, we are here to assist you in finding the right Long-Term Care Insurance plan for your family. We can help you create a policy that will fit your needs perfectly, and we’ll be there to help you every step of the way.
Our Nesso Wealth team is highly trained and experienced in financial risk management. We will help you create a comprehensive plan that will take all of your possible risks into account. This way, you can be prepared for anything that comes your way – now and in the future. Don’t wait until it’s too late to start thinking about risk management. Contact us today to create a plan for your family’s future.