Doctors need a lot of insurance. Members of our physician communities are not usually asking whether to buy insurance, but rather where to buy insurance. One of the rare insurance questions where there’s actually some debate or even people discouraging against buying insurance (unless it’s permanent life insurance) is in the case of long term care insurance. While the majority of us will likely require some form of long term care, in reality, it’s likely that it turns out to be better for many of us to self insure for when this time comes. In this article, we’ll cover what long term care insurance is, what the pros and cons of buying it are, and which physicians should consider purchasing long term care insurance.
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What is long term care insurance?
As physicians, we know better than most that life can change in an instant. Regardless of whether this is secondary to aging or disability, there are a host of resources that you may need for help if you aren’t able to perform all of your ADLs. Many of these are not covered by most health insurance plans. In this case, long term care insurance policy can help cover the costs of hiring help. Each policy is different but will generally help cover things like a home health aid or long term care such as at a residential assisted living facility, a nursing home, or otherwise.
As you’re probably aware of because of your patients, this care is generally very expensive, and often a burden to families. It’s not uncommon for nursing home costs to run about $100,000 a year, and other less comprehensive long term care needs will likely still cost tens of thousands a year. Medicare doesn’t cover a lot of these costs, as Medicare is meant for acute help such as short term rehab or a prolonged hospital stay, but not for chronic care. Medicaid does help in these situations, but most physicians would not qualify unless they burn through their savings first. Even if you do qualify for Medicaid, you’ll be limited to choosing options for care that take Medicaid.
Because of this, planning for these costs (we’re all going to age, and statistically, about ⅔ of us will require some form of help at some point in our lives) is a key part of every physician's long term financial plan. Whether you save enough money to cover it yourself or you use a long term care insurance plan is the big decision. If you plan on using an insurance policy, you should make sure you secure one before you have a condition that would exclude you, before you require help, and before you’re old enough (usually 70s) that you will no longer qualify for a plan. The older you get, the higher the statistics for the percentage of people who are denied long term care insurance.
What are the pros and cons of getting long term care insurance?
From the previous section, it may sound like everyone should get long term care insurance, as most of us will likely have to pay for these expenses at some point. The nice thing about having a policy is that you can ease the financial burden of long term care in the moment. If you itemize your deductions on your taxes, you may get a tax deduction.
However, while you can choose to some extent how much coverage you want, most policies cap out at a certain amount that can be paid out over your lifetime, and may even limit how much can be paid per day.
Payout also requires certification that you can’t do a certain number of ADLs (often 2). We know most of you reading this are physicians and know what ADLS are, but just in case you’ve forgotten since medical school, ADLs are activities of daily living, and include things like showering and bathing, going to the bathroom, dressing and grooming yourself, eating yourself, and being able to walk or transfer yourself from one place to another. While many people eventually encounter issues with one of these, the data shows that most people don't meet criteria for true inability to do two of these. Therefore, you may pay for this plan and not even qualify for benefits, but still have to find help or rely on family to help you with the one ADL that you are having trouble with.
All of these things have to be verified by a physician or nurse when the insurance company receives a request to claim benefits, and then even after verified, there’s often an elimination period before payout occurs, usually ranging from 1-3 months. The overwhelming majority of people who go to a nursing home are there for less than 2 years, and close to 75% of older individuals are in a nursing home for less than 1 year.
So then, the question is whether the cost of the policy is worth it. We’ll explore that next.
Is long term care insurance worth the cost?
This is the $x question. First, you need to figure out how much the policy will cost, which will depend on age, gender, your health status, whether or not you’re married (cheaper if you’re married as the assumption is you’ll have some help), and the amount of coverage that you want and how comprehensive the coverage is in terms of inclusions and exclusions. Additionally, the premiums could change and go up as you get older.
There’s a lot of fine print to look at, particularly in regards to limits and exclusions. Many of these policies that we see discussed on the groups have a maximum limit that is a lower 6 figure amount.
We do feel that by careful investing, many if not most physicians can self insure for this amount through careful saving and investing. For example, if a policy costs $2000 a year for a total benefit of $150,000, that same amount invested annually over thirty years is almost $170,000 at a return rate of 6%. So in many cases, assuming you budget for that savings instead of spending it, you will come out ahead by self-insuring.
Not insignificantly, additionally, many disability insurance policies include a payout if you are not able to do your ADLs. Considering we feel nearly all physicians should have disability insurance, this protects most physicians in the instance that they are become disabled prior to their mid to late 60s but haven’t yet saved enough money to self-insure.
Where can I get long term care insurance if I need it?
If you're looking to get a long term care insurance policy, visit our insurance agents for physicians page to find an agent to help you compare options and shop policies to find you the best deal. By using an independent insurance broker, you have an unbiased professional helping you find the best deal, versus an agent for a specific company wanting to mold your situation to one of their specific policies.
If you don't have a disability insurance policy yet, see what coverage you can get under a disability plan.
Learn more about the importance of disability insurance for physicians.
Conclusion
In summary, you should take a look at your financial trajectory and track your potential net worth by your 70s to decide whether or not you think long term care insurance makes sense for you. As many physicians are fortunate to eventually establish financial security by retirement age, the maximum payouts of these policies are a number that most physicians are able to afford. If you decide that you want to purchase long term care insurance, you can check with our recommended insurance agents for physicians to see if they can help.