Long-term care refers to assistance with personal or medical needs over an extended period of time.
Nearly 70% of people turning 65 today will need long-term care at some point in their lives,1 making it an issue that affects nearly every household. And while many people will be affected by the need for long-term care, not everyone takes advantage of long-term care insurance to help with costs.
However, long-term care is a significant expense, and many people cannot afford to cover all of the costs out of pocket. Traditional employer-based health insurance will not cover long-term daily care, and health insurance generally only pays for doctor and hospital bills. Long-term care insurance (LTCI) can help offset the costs of long-term care needs.
These 7 factors can help you determine if ltci is something to look for when planning your financial future.
1. long-term care insurance covers care in a variety of settings.
When people think of long-term care, most think of nursing homes. however, 73% of people receiving long-term care are at home, not in assisted living facilities or nursing homes.2
Long-term care is needed when someone is unable to perform daily activities such as dressing, eating, bathing, or moving around, and this help can often be provided in your own home by a home health aide . Although it’s not necessarily pleasant to think of scenarios where long-term care will be needed, LTCI can help cover the costs. can offer you a way to get care in your own home instead of in a nursing home or assisted living.
2. long-term care insurance can help fill the gaps in care.
It is impossible to know for sure if your family would be able to care for you if long-term care is needed. caregiving can be a huge financial and emotional burden. and due to the high cost of long-term care, 66% of caregivers end up using their own retirement and savings funds to pay for care.3 In addition, the logistics of care may not be feasible if your family members they live far away or cannot reconcile it with their own work or family obligations.
3. long-term care insurance covers more health care costs than medicare.
Medicare generally does not cover long-term care and will only pay for home care in very limited circumstances.
Medicare pays for skilled nursing home care only for short periods (up to 100 days) during which you recover after a hospital stay for a related condition, but that’s not the same as long-term care. term. once your care needs are stabilized and you need custodial or personal care, medicare will not pay those costs.
4. you will likely need some form of long-term care.
Today, a 65-year-old has a 70% chance of needing long-term care services at some point in their life.1 Because long-term care can be needed for many different reasons, it’s hard to know if I’ll need it or not.
It’s better to buy an ltci policy while you’re still in good health (usually age 50) than to wait until you’re sick or older, when it can become unaffordable. the younger you are, the lower your premiums will be.
5. your savings may not be enough to cover your long-term care needs.
There are several types of long-term care, from help with daily tasks and activities to complete care in a private room in a nursing home. the average assisted living facility costs $54,000 per year, and the average nursing home costs $94,900 per year for a semi-private room.4
With long-term care costs on the rise, your retirement savings may not be large enough to cover these expenses.
6. the cost of long-term care insurance varies.
The price will depend on factors such as your age and the level of coverage the policy will pay for if you need to use it.
To give you an idea, the American Long-Term Care Insurance Association determines that a couple opting for an initial policy benefit of $165,000, both age 55, will pay a combined annual premium of $2,080. for a couple age 65, the premium would increase to $3,750 per year.2
7. There are several types of long-term care insurance policies available.
a typical and traditional ltci policy will pay a predetermined amount for each service; for example, $100 per day for nursing home care. Generally, there will be a limit to the benefits you receive, either based on a number of years or a dollar amount. A plan that offers bundled benefits (meaning it covers more than one type of long-term care service) will set a total dollar amount for the various services you receive.
New types of ltci policies are gaining popularity, extending beyond the traditional “use it or lose it” type, many of which have seen premium increases.
An alternative is hybrid life and long-term care insurance. this type of policy combines long-term care insurance with permanent life insurance and offers more options:
- If you need long-term care, you can take advantage of the policy benefit.
- If you die before needing long-term care, the policy has a life insurance benefit.
- If you decide you need the money for something else, you can typically receive a cash value that may be approximately equal to or less than the total premiums paid.
- Contract terms and premiums are guaranteed not to change.
another alternative is a universal life insurance policy with an ltci clause. This option might be right for you if you are interested in a significant death benefit for your beneficiaries in the event ltci is not needed.
At the end of the day, caregiving can take such an emotional and financial toll on loved ones that it’s worth planning for long-term care now. Consider working with a financial professional to understand how traditional or alternative ltci policies might fit into your current retirement strategy.
Learn more about your long-term care insurance options.