What Is Long-Term Care Insurance and Do I Need It?
Planning for your healthcare needs later in life is more complicated than ever before. The cost of medical care continues to rise and many people are left wondering how they will pay for long-term care should they or their spouse need help. Though roughly 50% of Americans now age 65 or older will require long-term care services at some point in their life, very few have plans in place to cover the cost of care. One often discussed option is long-term care insurance.
How Does Long-Term Care Insurance Work?
Long-term care insurance is not unlike other types of insurance. The most common plans come with monthly premiums which vary in price based on age, coverage level, and health risks, among other factors. If you require long-term care services, your plan may reimburse expenses up to a daily and lifetime cap. For example, your plan may pay up to $150 per day with a lifetime cap of $325,000. Benefits usually don’t kick in until after what is called an “elimination period,” often 30-90 days after care begins. All expenses would be paid out of pocket until then. Like other types of insurance, plan structures and benefits will vary.
What Counts as Long-Term Care?
Long-term care (often referred to as LTC) is usually defined as care needed when you require assistance with two out of the six “Activities of Daily Living,” or ADLs. These activities are: bathing, dressing, eating, continence, transferring in and out of a bed or chair, and getting on or off the toilet. This care can be provided in a number of places, such as your home, a nursing home, an assisted living facility, or an adult day care facility.
Is Long-Term Care Insurance Right for Me?
There is much debate about whether long-term care insurance is a necessity. Research from the Department of Health and Human Services shows nearly half of all seniors 65 and older who will require long-term care will not need it for more than one year. Another factor to consider is the rising cost of medical care. A plan purchased today may end up only providing a small amount of relief when compared to the rapidly rising cost of care in the future. Many plans include inflation protection to defend against this, but it may not be enough.
Proponents of long-term care insurance will point to the worst-case scenario of a lengthy or unexpected need for long-term care. A recent study from Harvard claims 72% of Americans become impoverished after just one year of nursing home care. Many people feel more comfortable with the choices available to them with LTC insurance. If required to rely on Medicaid, your choices will be restricted to nursing homes who accept Medicaid payments. In many states Medicaid does not pay for assisted living at all. Age is an important factor to consider, as people who begin coverage earlier – say in their 50s to early 60s – can lock in lower rates before aging or health issues push the prices skyward. Other factors to consider include the availability of a family caregiver, your income level, and the amount of savings you have.
Many experts say you should spend no more than 5% of your income on a long-term care insurance policy, keeping in mind your premiums are likely to rise over time while your income may drop. Ultimately, whether you choose to purchase a plan should be a personal decision. If you think it may be right for you, research what plans are available to you. Many agents are licensed to offer plans from multiple providers, allowing you to get a broader view of the coverage. Contact the Marietta Wealth financial team today to get answers to questions you have on long-term care insurance.