According to the old saying, "Every cloud has a silver lining." I believe the silver lining in the stock market's recent volatility is a heightened awareness of the value of using long term care insurance as a means of helping protect one's investments.
The Dow Jones Industrial Average's slide from nearly 11,500 at the end of 19991, along with the plummet of more than 800 points in the week leading up to St. Patrick's Day 20012, serve as stark reminders that any portfolio of assets can be subject to sudden - and often unpredictable - erosion. The simple fact of the matter is that, no matter how conservatively one plans, the market offers no guarantees.
Many believe that the market will eventually rebound; the question is whether that will happen sooner or later. No matter which scenario plays out, long term care insurance from an established company with a history of rate stability can help protect an investor's assets from additional erosion.
Statistics indicate that 60 percent of people over 65 are expected to need some form of long term care in their lifetime3, and that 43 percent of people in the same age group are expected to spend some time in a nursing home in their lifetime.4
But because people may need long term care at any age for a variety of reasons, more people in middle age are exploring long term care insurance as a way to plan for their needs and to help protect their assets.5 And the younger the purchaser is, the cheaper it generally is to buy coverage. In most cases, long term care insurance purchasers pay less in premiums over their lifetime if they purchase long term care insurance at a younger age.6
Long term care insurance is a great complement to a comprehensive financial strategy, especially considering how expensive long term care can be. The average cost of a nursing home stay is almost $56,000 a year7 and can exceed $100,000 a year in some parts of the country8; adult day care averages $60 per day; and home care averages $80 per visit9. Given those costs, there is a significant possibility that an investor who finds him or herself needing long term care will liquidate some of their investments to pay those costs.
If an investor needs long term care before the market rebounds, and therefore before their portfolio regains its lost value, a long term care insurance policy can help provide funds to get the care needed to recover their health, while providing the time their portfolio needs to recover its lost value.
Long term care insurance can appeal even to well-heeled investors. A simple cost/benefit analysis will reveal how brief a period of care it would take to offset the premiums paid for long term care insurance.
With the market's ongoing volatility, and with more than 70-million baby boomers heading toward retirement10, another old saying comes to mind: "There's no time like the present" to look into long term care insurance.
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Guy R. Handley is a Florida based Senior Long Term Care insurance representative of GE Financial Assurance Companies, consisting of GE Life and Annuity Assurance Company, General Electric Capital Assurance Company and other affiliated companies. Long term care insurance is underwritten by General Electric Capital Assurance Company and, in New York, by General Electric Capital Life Assurance Company of New York. For more information, contact Guy Handley at 1-800-223-4963, ext. 28. GE Capital Assurance reserves the right to adjust future premiums for all policyholders in the same class and state; however, you'll never receive a rate increase just because of your age, change in health, or claims history.
1 Dow Jones and Company, 12/31/99
2 Dow Jones and Company, 3/9-3/16/01
3 Your Money, December/January 1999
4 Time Magazine, 8/30/99
5 The Boston Globe, 6/21/99
6 The Boston Globe, 6/21/99
7 Reuters, 12/13/00
8 The Wall Street Journal, 3/31/99
9 CNN Financial Network, 8/25/99
10 US Census Bureau, Projections of the Total Resident Population by 5-Year Age Groups, January 13, 2000