Long Term Care and Reverse Mortgages

Michelle Singletary’s column this morning was on Long Term Care Insurance. I always enjoy Michelle’s insight. She emphasizes the need for Long Term Care Insurance, which covers the cost of nursing homes, assisted living facilities and in-home care, which includes custodial care. That is, helping someone with activities of daily living (ADL’s).

I am continuously talking with people who have been in the position of being a care giver for someone close to them. This is not an easy job. It takes both emotional and physical strength, and often wears down a person who also has their own family to care for. We often call this the sandwhich generation: those who care for their parents and their children. How difficult the circumstances are and the challenges it brings to a family.

A survey recently released by the America’s Health Insurance Plans found one in four baby-boomers assume they have coverage for long term care. The reality is that most do not. Medicare only covers specific components of care and you have to meet certain conditions. Secondly, Medicaid is coverage for people in poverty and one has to spend down their assets in order to have medicaid cover expenses. This is not what most people want to do.

One of the difficult components of long term care insurance is the expense. It can be very expensive, especially if one waits too long. Based on a lot of retirees, their fixed income does not allow for an added expense, especially a steep one. It is a growing trend to begin looking at how reverse mortgages can help in the funding of long term care insurance. This is a situation that needs to be evaluated very carefully. The reality is that six out of 10 Americans who reach age 65 will need long-term care at some point in their remaining lives.

Reverse mortgages have become very flexible and may be a great fit for someone wanting LTC Insurance. It can be structured in a way that protects a portion of the equity, if that is what is desired. Secondly, if someone can not qualify for LTC Insurance, a reverse mortgage may provide enough funds to actually finance any long term care.

I met a man two years ago who had a long term care policy, who had to drop it after 20 years because of a rate increase that he could not afford. One year after cancelling his policy his wife was diagnosed with Alzheimer’s. He wasn’t told about the option of a reverse mortgage to help to finance the LTC Insurance premiums, so he lost 20 years of premiums in his policy, plus he had to cover his wife’s medical expenses as the disease progressed.

What a tragedy! He had wished he had learned about a reverse mortgage sooner. It simply reinforces my belief that everyone should learn about the basics about reverse mortgages. It just might provide a solution to a difficult situation for someone that they care about.

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Tags: HECM, long term care, long term care insurance, reverse mortgages, seniors

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