It’s widely known that one of the largest costs for Americans is health care. In retirement, many Americans make the often incorrect assumption that Medicare or Medicare supplemental insurance will handle the bulk of their medical expenses. Even those that think more realistically about their long term health expenses are taken aback by the expense of long term health care policies and their limitations.
Is there another way?
First, let’s talk about the big expense items that Medicare doesn’t cover and limits on treatment options.
1. Long-term care (also called custodial care). This is basically long term help with the activities of daily living; bathing, eating, getting dressed. It can happen at any age, but is more likely to occur during the retirement years. This can include long term care provided in your own home or in assisted living situations. These costs can range from $120 to $200 per day for basic home care. Add another $2 – $8 per hour for in home health aid. This assumes an 8 hour day, so it’s easy to see how quickly costs can rise. If you need an actual nurse full time, multiply the cost by 2 or 3.
2. Out-of-pocket expenses including deductible, co-pay, and 20% of the approved fees for dread disease like cancer. Complex treatments = big bills.
3. If you are in a dread disease situation, you may want to see a doctor that doesn’t participate in Medicare. That means you are writing the check, not the government.
These items can add up to tens or hundreds of thousands of dollars in medical bills that will be billed to you, not Medicare. That money won’t be part of your estate.
Consider using an inexpensive term life policy to help you protect you and your estate against these types of expenses. Some term life issuers offer add on options (“riders”) to their term life policies that may be used to address these situations. They are often referred to as “Living Benefit” or “Accelerated Death Benefit” riders. These riders often may be used to address 1 – 3 above by allowing you to access the face value of your policy for these type of expenses.
Term life policies allow policy holders to get a lot of protection for a little money. Millions in coverage can be had for a few hundred a month.
5 Key takeaways;
1. If you don’t need the policy, your heirs will thank you for the extra money they will inherit (assuming you move on before the policy expires). Extra cash is always handy, even if you are already inheriting 6, 7, or 8 figures. They may even be interested in paying some of the premium.
2. Get the longest term policy you can afford and do it before you turn 65. You will not be able to add or renew the policy after age 65. 10, 20, and 30 year terms are the typical options.
3. Make sure the company you obtain your policy from is financially strong and well managed. It doesn’t do much good to get a 30 year policy and see the company go under 15 years from now.
4. Read the fine print. Make sure you are getting coverage that addresses the Medicare gap that concerns you most.
5. Get a fiduciary to help you sort through your options — insurance agents are commissioned and may put you with whatever carrier is paying the biggest commission that month. Ask if they are being paid a commission to recommend a policy and whether they have a fiduciary responsibility to you, to themselves, or to their employer. If they are commissioned and don’t have a fiduciary responsibility to you, their recommendation may or may not be in your best interest. Better to be safe. Ask for full disclosure, including what each carrier pays in commission.