You’re healthy and active. Your days are packed with work, kids (grandkids), weekend puttering, and the occasional travel and vacation. It’s hard to imagine now, but over half of us will need long-term care later in life.
How will you pay for this costly care?
- Health insurance? No. Traditional health insurance does not cover care associated with chronic medical conditions, disability, or disorders such as Alzheimer’s and other forms of dementia.
- Medicare and Medicaid? No. Medicare only covers short nursing home and rehabilitation stays, some limited home health care that requires skilled nursing or rehabilitation. It does not cover custodial or supervised care and help with day-to-day living with a disability. Medicaid also falls short, federal and state health programs only support those with low incomes, and then only after your personal savings have been exhausted.
What exactly does long-term insurance cover and why is it important?
Long-term care insurance is coverage for a full range of services that are often required for those suffering chronic medical conditions, permanent disability, and memory disorders such as Alzheimer’s or dementia. These services might include assistance with daily tasks and care, like getting in and out of bed, bathing, dressing, or continual supervision. Most policies will reimburse for these services and care often provided in your home, a nursing home, an assisted living facility, or adult daycare.
Considering the eventual need for long-term care is more than just a consideration of providing adequate care, it’s an investment in protecting your family’s quality of life.
Let’s consider a common scenario.
Jim and Carol are an active and energetic couple in their early 50s. They have been reasonably good with their money, saving a little over $300,000 for retirement and continue to save for those Golden Years.
At 66 years old, Jim is diagnosed with Alzheimer’s. Carol was able to manage Jim’s disability at first, caring for and assisting Jim with daily routines. However, over time Carol needed additional help and used some of their savings to hire a home healthcare specialist to help with Jim for a few hours a day. Then eventually, as Jim’s condition worsened and behaviors became less manageable, he needs to move into a nursing home for full-time supervised care.
Five years later, Jim passed away. Carol, still a healthy 71-year-old, has to return to work full-time because their $300,000 nest egg is exhausted.
This is an all too common scenario and one of the best reasons to consider long-term care insurance coverage.
Why buy long-term care insurance?
Let’s dig a little deeper into the why of adding long-term care insurance to your long-term financial plan.
Starting with the facts:
- A little over half of the 65-year-olds will eventually develop a disability that requires long-term care. Of those individuals, most will need care for at least two years, and about 14% will require care for more than five years according to a 2016 study by the Urban Institute and Us Department of Health and Human Services. This is only likely to increase as Americans live longer and healthier lives.
- Traditional health insurance doesn’t cover long-term care and neither does Medicare and Medicaid for most seniors.
Considering these facts and highly probable eventuality, there are a few key reasons people buy long-term care insurance.
- To protect savings. Long-term care can quickly exhaust the healthiest of retirement savings. The lowest end of care, adult day health care has an annual median cost of $18,720, and nursing home care can range from $89,297 (semi-private room) to $100,375 (private room), according to Genworth’s 2018 Cost of Care Survey.
- To provide you with more choices in care. Simply put, the more money you spend the better the quality of care for yourself or your loved one.
Cost of Long-Term Care Insurance
Your personal rate for long-term care insurance will be determined by a few common considerations, including:
- Your age and health – pretty typical to health and life-related insurance, the younger and healthy you are the lower your premium.
- Gender – women generally pay more because they tend to live longer and have traditionally been more likely to make long-term care insurance claims.
- Martial status – premiums are typically lower for married people than single people.
- Insurance carrier – as with any insurance, it’s important to compare quotes. This is one of the big advantages of using an independent insurance agency, like Frost and Remer. We shop for you.
- Amount of coverage – you’ll naturally pay more for higher levels of coverage and protection.
Tax advantages to buying long-term insurance?
If you itemize deductions, especially as you get older, there can be some tax advantages to long-term care insurance. Federal and some state tax codes currently allow you to count part or all of your long-term care insurance premiums as medical expenses.
Schedule a virtual appointment for your full policy review and risk assessment. Ensure your future and protect the ones you love.