Usually, it takes a loved one needing support and care that they didn’t previously need to get someone to start thinking about your own potential extended care costs and how to plan for them. Although overwhelming to think about at times, it’s necessary and wise to plan ahead so that you get the care you might need one day on your own terms and in accord with your overall financial planning. You don’t want to be caught empty-handed if a situation arises where you need care and can’t pay for it.
Some might be wondering if there is a way to use permanent life insurance to potentially help cover the costs associated with these types of needs. This isn’t a yes or no answer, so the answer is… maybe. Life insurance is primarily intended to protect your loved ones after you have passed by providing finances to them. However, permanent life insurance also has living benefits, such as taking money out of your policy through loans and withdrawals. While loans against your policy accrue interest and decrease the death benefit and available cash surrender value by the amount of the outstanding loan and interest and accessing cash value will reduce the available cash surrender value and death benefit, a health emergency and/or an ongoing health need may necessitate withdrawing funds from any source available (including your life insurance policy). So, while you don’t want to withdraw too much money from a policy that could cause it to lapse, having a well-funded life insurance policy during your life can provide a valuable source of funds when it is sorely needed.
Another means to pay for catastrophic healthcare events and extended care needs is just additional saving. The challenge here is determining the amount of savings you might require for a potential need in the future of an unclear duration and unknown severity. Nevertheless, having savings resources will provide you more options than you would otherwise have to help pay for assisted living and nursing home care.
Government programs are another source of support for a catastrophic health situation, but this relies on the strength of the government’s financial situation and also may require a very low income and few financial assets. In many cases, this is likely a last resort to provide the basic care to someone who had depleted their nest egg. Since this is just the basics, the benefits provided may not match up with your desired level of care for your loved one.
Additional insurance protections are also available for a variety of needs and disabilities. The most important thing you can do is plan early and plan well. It’s never too soon to start saving or start considering your wishes in the event of a catastrophic care event. If you are wondering what the best approach might be for you, please reach out to us and we can help determine your next steps.
