Long-Term Care Insurance Options
About 70% of Americans who reach age 65 end up needing some form of long-term care for some time in their remaining life. This was found in a study from the U.S. Department of Health and Human Services.
While it’s true, some people will get by with unpaid care from their own family members, nearly half will end up needing some form of paid assistance. About 24% will need over two years of paid care, and around 15% will need to spend two years or longer in a nursing home.
The costs of care are highly variable. How long will you need it for? How intensive will your needs be? Obviously, you can’t predict these. And, the cost can also depend on where you live.
Traditional Medicare does not cover long-term care, beyond some skilled care right after hospitalization for an injury or illness. Some Medicare Advantage Plans from private insurers do offer supplemental coverage for services like meal delivery and rides to medical appointments. But, these benefits are still limited.
The largest single funding source for long-term care is Medicaid, the joint federal and state program that covers lower-income Americans. Income limits vary by state. But, typically, you can’t get Medicaid unless you exhaust most of your savings beyond your primary home and vehicle.
And, even then, you might not qualify for long-term care. Some pre-existing conditions may prevent you from being insurable. For example, if a medical condition causes you to already need help performing certain basic tasks.
You can potentially get a discounted premium if you and your spouse choose to purchase policies together.
If you decide to go ahead with a policy, though, there are a number of further considerations to think about.
For example, according to studies by the Society of Actuaries, the average time for claims in 2014 which lasted longer than a year, ranged from three and a half to four years. Typically, two to four years is a good “ballpark” estimate. The longer the benefit period the policy offers, and the higher the benefit policy amount, the higher the cost will be for you.
Clients who do not have enough assets accumulated to self-insure may be able to buy an LTC policy during their earlier working years. Then, there may be a point where their assets can support a long-term care event. Then, they can either terminate their policy or modify it for less coverage.
In general, long-term care usually turns into a less-than-ideal investment at a certain point. If you don’t happen to use it early, it can be a good investment. This is because you have paid fewer premiums upfront and are using the benefits. The longer you take to use the policy, the lower your returns on it will be. If you end up using the policy in the first five to ten years, though, it can be very advantageous.
However, the longer you take to use the benefits, the more sense it will make to just put the money aside for yourself so you’ll be able to afford to self-insure. Of course, there is no way of actually knowing if and when an event will happen that puts you in need of long-term care.
One way you might be able to provide for long-term care? Insurance products or certain types of annuities. These products may come with certain benefits when it comes to paying for long-term care.
Additionally, though, an annuity comes with further benefits that make it an excellent way to provide yourself with retirement income. The right type of life insurance might be a way to “stash away” some money in the event of not only long-term care being needed, but any other unexpected expenses, too.