Do I Really Need Long-Term Care Insurance

Many people do not like to think about their health care ‘needs’ as they get older. But the fact is, health care costs have been far outpacing inflation for many years, and it is wise to plan for your future needs. According to the U.S. Department of Health and Human Services, Americans turning 65 years old today have a 70% chance of needing long-term care at some point during their retirement years requiring adequate long-term care insurance. Long Term Care Insurance

These statistics show that if you plan on living out your golden years without the need for long-term care, the odds are not in your favor. So the question is – if you do happen to be one of the 7 out of 10 that requires long-term care, how do you plan to pay for it? Nursing homes and assisted living centers are very expensive, and they can quickly eat up all your assets. In-home senior care is more affordable, but it is still not cheap, and not every health condition allows for an individual to remain at home.

What About Medicare and Medicaid: Many people mistakenly believe that government programs will be there to take care of them after they turn 65. Aside from the fact that these programs are in serious financial trouble and may not even be there (at least in their current form) when you get to retirement, these programs are full of holes or have strict requirements to qualify.

Medicare hardly pays for any long-term care services. In addition, Medicare does not even cover the full amount needed for basic health care services such as doctor visits. You may have heard that many doctors do not accept Medicare patients anymore because they are tired of being paid such a low percentage of the fee they charge for their services.

Medicaid is a different story. The coverage through Medicaid is fairly comprehensive. The problem is that you need to have a low income and limited assets to qualify. Essentially, this means that to be eligible for Medicaid when you retire, you need to plan on having a retirement income at or near the poverty level; and if you happen to accumulate any significant assets over your lifetime, you need to give them away to your kids, put them in a trust, or find another way to officially disown them while still maintaining access to them.

How Does Long-Term Care Insurance Work: The bottom line is that unless you are wealthy and able to easily cover long-term care expenses or poor enough to qualify for Medicaid, long-term care insurance is something you should seriously consider. Then the next question becomes how much coverage you need, and what can you afford?

The cost of long-term care insurance depends on several factors, these include:

  • Your age
  • Your current health
  • Total monthly benefit and maximum benefit
  • Benefit growth rate
  • Elimination period

Age and health status are pretty self-explanatory. The younger and healthier you are, the more affordable the coverage will be. For this reason, it is best to consider long-term care insurance sooner rather than later. For example, a policy purchased while in your mid-40s and in good health will be much cheaper than waiting until you turn 60 and already have some health concerns.

The policy will have a maximum monthly benefit and total maximum benefit. These two figures will determine how long you will be able to receive benefits (at the maximum monthly payout level) if you need them. For example, if your monthly maximum is $5,000 and your total maximum benefit is $250,000, then if you have a covered incident and need to use your monthly maximum, you would be able to receive benefits for a total of 50 months.

Most policies have a growth rate that is designed to help offset inflation. Typically, a policy would have an annual growth rate of 3%. This means that over a couple decades, your total maximum benefit could be nearly double. Using the previous example, $250,000 at 3% growth for 20 years increases the total maximum benefit to just over $450,000.

Most long-term care policies have an elimination period that works similarly to a deductible. A typical elimination period would be 90 days. This means that if you have a qualifying long-term care need, you must pay for 90 days of care out of pocket before your monthly benefits kick in.

Finding the Right Long-Term Care Policy: There are many companies that sell long-term care insurance, and the options can seem overwhelming. The best place to start is to speak with an independent insurance agent. Independent agents have access to several of the top insurers in your state, and because they are not captive to any one carrier, they can shop freely for and locate the policy that best fits your needs and budget.