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Category: Insurance

Understanding Long-Term Care

 

Addressing the potential threat of long-term care expenses may be one of the biggest financial challenges for individuals who are developing a retirement strategy.

 

The U.S. Department of Health and Human Services estimates that 69% of people over age 65 can expect to need extended care services at some point in their lives. So, understanding the various types of long-term care services – and what those services may cost – is critical as you consider your retirement approach.[i]

 

What Is Long-Term Care? Long-term care is not a single activity. It refers to a variety of medical and non-medical services needed by those who have a chronic illness or disability that is most commonly associated with aging.

 

Long-term care can include everything from assistance with activities of daily living – help dressing, bathing, using the bathroom, or even driving to the store – to more intensive therapeutic and medical care requiring the services of skilled medical personnel.

 

Long-term care may be provided at home, at a community center, in an assisted living facility, or in a skilled nursing home. And long-term care is not exclusively for the elderly; it is possible to need long-term care at any age.

 

How Much Does Long-Term Care Cost? Long-term care costs vary state by state and region by region. The national average for care in a skilled care facility (semi-private in a nursing home) is $85,775 a year. The national average for care in an assisted living center is $45,000 a year. Home health aides cost a median $18,200 per year, but that rate may increase when a licensed nurse is required.1

 

Individuals who would rather not burden their family and friends have two main options for covering the cost of long-term care: they can choose to self-insure or they can purchase long-term care insurance.

 

Many self-insure by default – simply because they haven’t made other arrangements. Those who self-insure may depend on personal savings and investments to fund any long-term care needs. The other approach is to consider purchasing long-term care insurance, which can cover all levels of care, from skilled care to custodial care to in-home assistance.

 

When it comes to addressing your long-term care needs, many look to select a strategy that may help them protect assets, preserve dignity, and maintain independence. If those concepts are important to you, consider your approach for long-term care.  To discuss long-term care with a CapSouth advisor, contact our office at 800.929.1001 or visit our website at www.capsouthwm.com to request a meeting.

 

To talk to a CapSouth advisor about a strategy for long-term care, please call 800.929.1001 or visit our website at www.capsouthwm.com

 

Investment advisory services are offered through CapSouth Partners, Inc., dba CapSouth Wealth Management, an independent registered Investment Advisory firm. Information provided by sources deemed to be reliable.  CapSouth does not guarantee the accuracy or completeness of the information.  This material has been prepared for planning purposes only and is not intended as specific tax or legal advice.  Tax and legal laws are often complex and frequently change.  Please consult your tax or legal advisor to discuss your specific situation before making any decisions that may have tax or legal consequences.

 

This article contains external links to third party content (content hosted on sites unaffiliated with CapSouth Partners). The policies and procedures governing these third-party sites may differ from those effective on the CapSouth company website, as outlined in these Disclaimers. As such, CapSouth makes no representations whatsoever regarding any third-party content/sites that may be accessible directly or indirectly from the CapSouth website. Linking to these third-party sites in no way implies an endorsement or affiliation of any kind between CapSouth and any third party, including legal authorization to use any trademark, trade name, logo, or copyrighted materials belonging to either entity.

[i] https://www.fool.com/retirement/2018/09/02/5-long-term-care-stats-that-will-blow-you-away.aspx

Life Insurance as an Asset Class

By J. Scott Fain

July 2019

Viewing life insurance as an asset class provides an additional benefit to consider when evaluating the purchase or continuation of an insurance policy.

 

What do I mean by asset class?  Traditional asset classes might include equities, fixed-income securities, cash equivalents, and real estate.  These categories organize various financial tools into groups that have similar characteristics, primarily in terms of risk.  Equities are generally considered to provide the greatest return over time, but also can carry the greatest amount of risk and volatility.  Advisors and portfolio managers typically strive to diversify clients’ portfolios to manage the amount of risk taken while still achieving acceptable rates of return over time.

 

Through the types of investments referenced above, what circumstances are needed for you to make money?  (Hint:  We’ve mentioned two big factors twice already…)  That’s right, you need returns and time.  We all hope for long, prosperous lives, but what if death occurs prematurely?  Now we have removed the element of time.  Though our money may have been invested well, those investments may not have had time to perform.

 

So what options do we have available to provide a greater return in the short-run?  You guessed it:  Life Insurance.  What if we had sufficient liquidity for our lifetime needs, and took one portion of our assets and invested in a life insurance policy?  Let’s look at an example:

 

Charlie is a 42 year-old male in good health.  Charlie is married to Sara, and they have two children, Larry and Mary.  Charlie and Sara currently have $750,000 in assets, and Charlie has an annual income of $85,000.  We will utilize sample average rates of return for the typical asset classes, and guaranteed internal rates of return for the life insurance death benefit based on a sample Nationwide illustration.

 

Charlie plans to contribute an additional $7,500 per year to his investments.  Using a $1,904 annual premium for a $250,000 permanent life insurance policy guaranteed to Age 121, let’s look at potential outcomes:

 

 

 

 

Under this simplified example, if all typical investments average the assumed rates of return, the portfolio diversified with insurance is more favorable if death occurs any year through age 76.  Following that age, investing the full $7,500 annually in equities would’ve generated a higher asset value.  Note:  These figures do not provide an adjustment for the tax savings.  The $250,000 death benefit generated by the life insurance policy pays to Charlie’s heirs income tax free under current law.  It is also important to note that the return generated by the life insurance policy is guaranteed, subject to the claims paying ability of the insurance company.

 

Might it be time for you to consider insurance as an asset class?

 

Contact CapSouth at 800.929.1001 for more information on this concept and how it might apply to your particular situation.  Also visit our website at www.capsouthwm.com 

 

CapSouth Partners, Inc., dba CapSouth Wealth Management, is an independent registered Investment Advisory firm.  CapSouth does not offer tax, accounting or legal advice. Consult your tax or legal advisors for all issues that may have tax or legal consequences.

Newly married couples should consider insurance needs.

Insurance When You’re Newly Married

 

Marriage changes everything, including insurance needs. Newly married couples should consider a comprehensive review of their current, individual insurance coverage to determine if any changes are in order as well as consider new insurance coverage appropriate to their new life stage.

 

Auto. The good news is that married drivers may be eligible for lower rates than single drivers. Since most couples come into their marriage with two separate auto policies, you should review your existing policies and contact your respective insurance companies to obtain competitive quotes on a new, combined policy.

 

Home. Newly married couples may start out as renters, but they often look to own a home or condo as a first step in building a life together. The purchase of homeowners insurance or condo insurance is required by the lender. While these policies have important differences, they do share the same purpose – to protect your home, your personal property, and your assets against any personal liability.

 

You should take special care of what is covered under the policy, the types of covered perils, and the limits on the amount of covered losses. Pay particular attention to whether the policy insures for replacement costs (preferable) or actual cash value.

 

Health. Like auto insurance, couples often bring together two separate, individual health insurance plans. Newly married couples should review their health insurance plans’ costs and benefits and determine whether placing one spouse under the other spouse’s plan makes sense.

 

Disability. Married couples typically combine their financial resources and live accordingly. This means that your mortgage or car loan may be tied to the combined earnings of you and your spouse. The loss of one income, even for a short period of time, may make it difficult to continue making payments designed for two incomes. Disability insurance replaces lost income, so that you can continue to meet your living expenses.[i]

 

Life. Central to any marriage is a concern for one other’s future well-being. In the event of a spouse’s death, a lifestyle based on two incomes may mean that the debt and cash flow obligations can’t be met by the surviving spouse’s single income. Saddling the surviving spouse with a financial burden can be avoided through the purchase of life insurance in an amount that pays off debts and/or replaces the deceased spouse’s income.[ii]

 

Liability. Personal liability risks can have a significant impact on the wealth you are beginning to build for your future together. Consider purchasing umbrella insurance under your homeowners policy to protect against the financial risk of personal liability.

 

Extended Care. Extended care insurance may be a low priority given other financial demands, such as saving for retirement. Nevertheless, you may want to have a conversation with your parents about how long-term care insurance may protect their financial security in retirement.

 

If you’d like to discuss your insurance needs, contact CapSouth Wealth Management at 800.929.1001 or visit our website at www.capsouthwm.com

 

Investment advisory services are offered through CapSouth Partners, Inc., dba CapSouth Wealth Management, an independent registered Investment Advisory firm. Information provided by sources deemed to be reliable.  CapSouth does not guarantee the accuracy or completeness of the information.  This material has been prepared for planning purposes only and is not intended as specific tax or legal advice.  Tax and legal laws are often complex and frequently change.  Please consult your tax or legal advisor to discuss your specific situation before making any decisions that may have tax or legal consequences.

 

This article contains external links to third party content (content hosted on sites unaffiliated with CapSouth Partners). The policies and procedures governing these third-party sites may differ from those effective on the CapSouth company website, as outlined in these Disclaimers. As such, CapSouth makes no representations whatsoever regarding any third-party content/sites that may be accessible directly or indirectly from the CapSouth website. Linking to these third-party sites in no way implies an endorsement or affiliation of any kind between CapSouth and any third party, including legal authorization to use any trademark, trade name, logo, or copyrighted materials belonging to either entity.

 

[i] https://www.chicagotribune.com/business/success/terrysavage/tca-disability-insurance-can-protect-you-from-unthinkable-20190410-story.html

 

[ii] https://www.fool.com/retirement/2019/05/05/6-reasons-americans-dont-have-life-insurance-and-w.aspx

 

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