Thanks to healthier lifestyles and advances in healthcare, many of us can expect to live longer. But living longer increases the possibility of chronic health issues that require long term care. Although it's one of those topics few of us like to think about, the expense involved with assisted living, nursing home, or hospice care makes evaluating your long term care insurance needs worthwhile.
Long term care insurance is an economical way to help you protect yourself and your family against the potentially high costs of long term care there's a lot to consider, and long term care insurance is not for everyone. Your age, assets, health, and family situation should all be taken into account before making a purchase decision.
The decision about whether to purchase long term care insurance is also directly related to your future plans, so thinking about and discussing future care wishes and desires with family members is a big part of the purchasing decision.
Because long term care insurance is complex, you might find it helpful to discuss your options with a licensed agent. Agents can explain coverage and address your specific questions and concerns, as well as help you find a solution that's best for you.
Resource Guide - Planning for Long Term Care
Life Guide - Planning for Retirement
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Long term care Insurance helps when you're left with less capacity to do normal kinds of daily tasks on your own, such as making meals, cleaning, getting around or bathing. It helps to reimburse your expenses for covered long term care services. The facts are that the causes for needing long term care (health crisis, aging, accidents) are pretty common.
At home - Long term care insurance helps pay for services provided by home caregivers and - if they are new to caregiving - their training, as well as things like medical monitoring equipment, to make you feel better and safer at home.
Care in Assisted Living Facilities - These facilities provide independent living within a monitored environment and access to personal care services if needed.
Care In a Nursing Home - Nursing homes provide a living environment with 24-hour access to skilled nursing care, including medical services and monitoring of your needs.
Aren't I Covered Already?
Neither disability insurance nor health insurance covers what long term care insurance can (assisted living, home care, nursing) over the long-term.
Won't the government or Medicare take care of it?
If you have a certain level of savings or assets, you might not qualify for any level of government assistance. And, if you do qualify, you may not have the control over the type of care or the location of care that you prefer.
I can pay with savings.
This is a common myth when it comes to long term care. Many people underestimate the costs, which today run about $18 an hour for a home care aide and $74,000 a year for a private room in a nursing home.1 With costs at that level, you could easily run through a typical nest egg in 1-2 years of paying for care.
Insurance is too expensive.
Long term care insurance can be expensive, but it's usually very flexible in terms of cost and the coverage it provides, so you can put together a plan that meets your needs and fits your budget.
1 Genworth Financial 2009 Cost of Care Survey.
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The wide range of coverage options, premiums, co-pays, and other costs makes purchasing long term care insurance something that requires your time and research. For many, the complicated nature of the coverage means that discussing the purchase with an agent is the best way to go.
There are a few ways to proceed. Before ultimately selecting a long term care plan, it's in your best interest to compare plans from several carriers to insure that you select the policy that will best fit your needs and budget. Web-based tools and applications are an easy way to determine coverage and cost, and they eliminate the need to call around to multiple companies and agents.
A licensed agent can help you sort out all the details of a long term care insurance plan. Of course, it's important to keep in mind that it's an agent's job to try and sell you a policy. That doesn't necessarily mean that they don't have your best interest in mind, but it does mean that you should be sure to shop around and speak with multiple agents before making a decision. Before you speak to an agent, it's wise to do some research on your own.
Working with an Agent
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It's a good rule of thumb that long term care insurance is best for people who can comfortably afford the premiums and can handle premium increases over time. Though there are strict laws regarding such increases, it is wise to expect some rise in premiums over the life of a long term care insurance policy.
It's an individual thing: your overall financial picture determines how affordable long term care policies are for you. One common measure is net worth, excluding your home - which means the amount of investments and savings you expect to have after you retire. Realistically, long term care insurance might not be suitable for people with lower incomes or less than substantial investments.
Another measure of affordability is how much the insurance costs as a percentage of your expected retirement income. If the premiums take up more than 10 percent of your future income, you might not be able to afford the coverage.
Of course, you can always purchase a policy with reduced coverage to save money and keep the premiums affordable. You can keep premiums lower by increasing your deductible and skipping some benefits. Most policies give you at least some flexibility in this area.
Cost of Care Map
Cost of Care Survey
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Long term care insurance is an important issue for most people over 50. You've worked hard and saved. But the longer you live, the greater the likelihood of a long-term care need.
The unfortunate truth is that Medicare does not provide the type of coverage that most of us prefer. Medicare generally offers very limited coverage and only for a short period of time. It is not designed to cover long term care and does not offer significant help with these expenses. Medicaid can pay for nursing home care and some other types of long term care, but this coverage requires that you have little or no income - and often little or no assets either.
For many of us, the decision of whether or not to purchase long term care insurance involves more than our individual choices. Your family members are probably not professional caregivers. Even if they are, you should think carefully about whether you want your future care to come from them. Also, because long term care is directly related to your financial future, discussing your wishes with family members should be a big part of the purchase decision - and an extension of estate planning.
Life Guide: Choosing Medicare Coverage
Independent Living - Starting a Dialogue
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