Compensate The Premiums for Long Term Care Coverage Plans, Instead of Buying A Long Term Care Insurance Policy?
The question that is raised above is a common query for many people who desire to get long term care services. Actually, it depends on the age and requirement of people for such services. This article deals with it by undertaking various presumptions and their probable outcomes, which helps in elucidation of the topic.
Many of us are throttled by a question that whether we require investing money with which we would reimburse the premiums for long term care plans, instead of buying a long term care insurance policy?
So the answer goes like if you are below the age of 55 years, you may assume that, because the probability of long term care expenses for you is for many years to come in the forthcoming period, you can spend the amount, or else use it for paying the monthly premiums of long term care insurance coverage. In that case, if you feel the requirement for long term care services, you can merely take out the investment; unless you will have money for your beneficiaries, for endowing to a charitable organization, or for catering your own requirements.
But if you take such an approach you may become absolutely helpless, in case you require long term care services in your mid or later part of your 50's, 60's or in your initial 70's. In case you have reached 80 years of age and still haven't opted for any such long term care services, then you are in a more helpless situation, as you may require it anytime and even for an extended period. Therefore it would be better if you consider certain presumptions from the very beginning:
- Presume that you are of 55 years of age and will not require any of the long term care services for the next 30 years, at the time when you will reach the age of 85 years.
- Presume that can set aside a sum of $2,000 in each year. You can think of investing this money, which is kept aside by and make sure of the fact that this investment of yours, increases every year at the rate of 5% (after deducting the taxes and levies that are applicable).
It must be kept in mind that the numerals, which are denoted in Point No.2 has not been used purposefully, in order to signify the monthly premium amount of a long term care insurance policy, for a person who has attained 55 years of age. This is because the rate of premiums differs and alters to a great extent considering on the inflation, sum of benefit (calculated on every day basis), the extent of the waiting period, the time-span of the benefit period, and the various other characteristics of insurance policies. The numerals are given in order to demonstrate how the entire scrutiny may operate.
Some of the probable estimations prepared on the basis of your presumptions
Keeping in view of the above mentioned presumptions it can be estimated that after a period of 30 years, your money that was kept aside by you will mature to an amount of $139,500. Make sure, that you consider the increase of nursing home expenses (considering the present scenario) because of price rise by 5% every year, from an amount of $7,000 each month (at present) to an amount of $28,800 each month, in the forthcoming years.
By the time you attain the age of 85 years, if all your presumptions appears to be exactly as thought to be, then you would be able to compensate (through the money which you have kept aside) the expenses incurred for nursing home care services for below three months. It may happen that you are in the requirement of more money, to spend for getting these services. This is because by the time when you will attain the age of 85 years, the prices of the long term care services may have increased more rapidly, than the normal rate of 5% each year. It may also happen that by the time your age turns up 85 years, the investment which you have made 30 years ago, may have produced less than your assumed rate of 5% (after deducting the taxes and levies that are applicable). Therefore in case if this happens due to any of these above mentioned circumstances, you are left with no other option but to dissolve all your properties and financial resources (if you posses any such resources), which you haven't thought of dissolving like this.
However things may not turn up like this, while it may also produce those results that were expected by you. This is like it may be feasible that you were able to keep aside an amount of money above $1000, or your investment may have produced over your assumed rate of 5% (after deducting the taxes and levies that are applicable) or the price for long term care serves may increase very sluggishly than the usual rate of 5% every year). It may also happen that all these things happen at the same time, which would lead to your ultimate gains. In such circumstances if you feel the requirement for any sort of long term care services for the very first time in your life after you attain 85 years of age, then you will be in a position to make a payment for the expenses incurred for such services. In addition to this you will be left with more money in your hand after paying for these services. You will be capable to paying for excess than the instance mentioned above.
Outcome that may be produced if substitutive assumptions are taken into consideration
Some of the possible hints are mentioned below about what be the outcome, which can be produced by the substitutive presumptions:
- The expenses for nursing home services increase by a rate of 3% each year for a period of 30 years. Therefore it would lead to a monthly expenditure of $16,500
- You may be able to receive 6% every year (after deducting the taxes and levies that are applicable) by keeping aside $1,000. If this happens you will be able to build up $83,800
- You may be able to keep aside a sum of $1,200 every year at the rate of 5% (after deducting the taxes and levies that are applicable). If this happens you will be able to build up $83,700
However it may also be possible that you never experience the requirement for long term care services in your entire span of life. In case you require them, it will be only for 1-2 months and that's all. If this happens, then purchasing a long term care will not be effective in this case. Of course, excepting this situation, buying such a policy is very much advised for people who may face the other circumstances. So in case you are not able to make any such presumptions or predict the results, then you can proceed to buy a long term care insurance policy.
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