There is a good possibility that you or your spouse will eventually require some form of long-term care (LTC). According to the Centers for Medicare & Medicaid Services, at least 70% of people aged 65 or older will require some form of long-term care services and support during their lives.1
Whether you or your spouse will be among this group is impossible to predict. But it is wise to consider how you might pay for long-term care and whether long-term care insurance is a good idea for you.
Cost of Care
Perhaps the first consideration is determining the potential cost of long-term care. Below is a summary of current costs according to the Genworth 2017 Cost of Care Survey.
Median costs in the United States:1
- $235/day for a semi-private room in a nursing home
- $267/day for a private room in a nursing home
- $3,750/month for care in an assisted living facility (for a one-bedroom unit)
- $135/day for a home health aide
- $131/day for homemaker/companion services
With health care costs rising every year, these expenses can be expected to grow substantially over time.
Why Would You Need Long-Term Care Insurance?
For the most part, those who need long-term care are left to foot the bill on their own. Neither Medicare, nor Medicare supplemental coverage, also known as Medigap insurance, typically cover long-term care. Medicaid will cover a large share of such services, but only if you meet stringent financial and functional criteria. What's more, most employer-sponsored or private health insurance plans follow the same general rules as Medicare. Therefore, most people who need long-term care must pay for some or all of it on their own. That's why long-term care insurance may be so important.
Cost of Insurance
Like life insurance, long-term care insurance policy premiums largely depend on your age and health. If you take out a policy when you are young, you can expect to pay comparatively low premiums during the life of the plan, while starting a new policy when you are older will entail significantly higher monthly premiums.
Most long-term care policies sold today are federally tax-qualified, which means the premiums paid and out-of-pocket expenses for long-term care may be applied to the medical expense deduction of the federal tax code. Additionally, long-term care benefits received are not taxed as income up to certain limits. Consider meeting with a financial expert to discuss your particular situation.
Long-term care policies are complex and vary widely. But in general, long-term care insurance typically covers the following:
- Nursing home care
- Adult day care
- Visiting nurses
- Assisted living
- In-home assistance with daily activities
LTC includes a range of nursing, social, and rehabilitative services for people who need ongoing assistance due to a chronic illness or disability. LTC insurance can be used by anyone at any age who suffers an accident or debilitating illness, but it most frequently is used by older adults who need assistance with essential physical needs, such as bathing, dressing, or eating.
As you evaluate long-term care insurance, consider the following variables:
- Coverage Parameters. Policies will differ in the types of services they support, making the choice of a policy that best meets your particular needs so important.
- Benefits Payout. How much does the policy pay per day for care in a particular setting? How does the policy pay out (e.g., a fixed daily amount, as reimbursement for the cost of care up to a daily maximum)? Does the policy have a maximum lifetime limit? Are there adjustments for inflation?
- Eligibility. Does the policy use certain triggers to determine benefits eligibility, such as the formal diagnosis of an illness or disability? What is the maximum issue age for the policy?
- Women May Need More. Longer life spans for women may signal the need for additional coverage.
Deciding whether to purchase long-term care insurance will depend on your personal situation. You may want to consider your family health history, your level of assets to potentially pay for long-term care, and your feelings about relying on family members for support. Probing these and other individual circumstance can help you make a well-informed decision.
Have questions? Let's Talk.
1Source: Genworth, 2017 Cost of Care Survey, 2017.
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