Do I Need Long Term Care Insurance?

Published on February 7, 2019 by Eric Rosenberg in Life Settlements, Retirement Planning

Seniors walking, do I need long term care insurance.

Long-term care may include a stay in a nursing home, assisted living facility, or even home care. Even if you have a spouse or other family member to help with some basic tasks, you may need a little extra help sometimes while they are at work or otherwise away from home. You may ask… Do I need long term care insurance?

With high odds you will need long-term care insurance and potentially high costs for long-term care, you should seriously consider this type of insurance to protect your family and your finances. While health insurance covers things like doctor visits and prescription medications, it does not cover help at home with things like laundry, cooking, and getting from bed to chair or to and from the bathroom.

Why Someone May Need Long-Term Care Insurance

An American turning 65 today has a 70% chance of needing long-term care at some point in their life, according to the US Department of Health and Human Services. 20% of today’s 65-year-olds will need care for at least five years.

We are living longer than ever before, so odds are you will need some type of care at some point in your life. With a private nursing home room costing as much as $8,000 per month, most people are not prepared for this type of cost from savings alone.

With the right long-term care insurance policy, the insurance company will either reimburse you for care related costs or write you a check to use toward care needs with no restrictions. Either way, it is better than paying for all of those costs out of pocket!

According to Department of Health and Human Services data, 69% of people need care at some point and for an average of 3 years. It could be due to a trip and fall injury, a car accident, cancer, or a common disabilty related to aging. There are countless examples of why you may need long-term care. The insurance is here to help you afford those costs.

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Items to Consider When Buying Long-Term Care Insurance

There was a time when it was easy to buy a long-term care insurance policy and it was relatively inexpensive. These days, however, long-term care insurance is harder to find and more expensive. This is a market response to the long lifespans and high odds of needing long-term care.

  1. First, make sure you know what resources you have available to you today that could help with the costs of care. Medicare and Medicaid may both offer some financial support toward your long-term care needs. You U.S. House Representative’s local office is often a good resource to learn more about these programs and opportunities for more support and information close to home.
  2. Next, it is important to look at the cost. Don’t rush into buying an expensive policy you can’t afford. Instead, do a little homework to find the best policy for your needs. With an annual cost in the tens of thousands of dollars, that monthly premium may be well worth the cost if you do need care at some point.

When it comes to paying for your long-term care costs, most long-term care insurance policies offer a daily benefit. You can typically choose your own method and care provider, but it is important to check with your insurance company before signing up to make sure you don’t get stuck with services that won’t be covered by the insurance policy.

Home care is often more affordable that many people realize, and with a good insurance policy it may be easier to stay in the comfort of one’s own home than go to an expensive nursing home.

Nursing home care and memory care for Alzheimer’s disease are generally the most expensive forms of long-term care, but may be necessary depending on health care and activities of daily living (ADLs) where assistance is needed.

What is This Type Of Insurance Used For?

As the name implies, long-term care insurance is generally used for long-term care costs. A long-term care policy charges a monthly premium from the time you purchase the policy. If you ever need to submit a claim, you can get paid back for care related costs you paid for out-of-pocket or get a check to use toward long-term care costs.

It is also important to understand what long-term care insurance does not cover. Long-term care coverage is generally focused on people who need help with common activities of daily living.

  • Those include things like cooking, cleaning, laundry, taking out the trash, getting dressed, bathing, moving around a home, toileting, and other basics. This is not the same as home health care, which is focused on medical needs.

Home care may include simple tasks like getting pills from the bathroom, but care workers are not licensed nurses or doctors in most cases, so they can’t provide medical care.

Once you believe you qualify for a claim under a long-term care policy, you file the claim with the insurance company. This starts a waiting period before benefits are paid. Once that LTC insurance starts to pay your benefits, you can generally choose how to allocate the funds.

If your insurance funds are exhausted, remember you can pay out-of-pocket for upgrades like a private room. If you only need adult day care part-time, on the other hand, it is likely your insurance will cover much if not all of the cost.

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Pros & Cons of Long-Term Care Insurance

  • Pros of Long-Term Care Insurance
  1. Whether a care condition requires a nursing home stay for a period of time or a visit to any other type of care facility, long-term care insurance offers peace of mind and safety net that can protect your net worth from disaster.
  2. Once you buy long-term care insurance, that policy is locked in as long as you pay the annual premium or monthly premium costs. As long as you pay, the cost of long-term care is covered up to the policy limit should you ever need to file a claim.
  • Cons of Long-Term Care Insurance
  1. If you have enough in savings to self-insure, you can pay for care services out-of-pocket without getting long-term care insurance. That also saves you from paying a premium for the policy. However, 78% of Americans live paycheck-to-paycheck, so if you are like most people, self-insure is not an option.
  2. The average annual cost may also be higher if you have a family history of medical conditions that often lead to a need for care services. Policies also often have limits. For example, you could buy a policy that pays for care for two years, three years, five years, or more. It all depends on your situation and what the insurance companies are able to offer you for long-term care insurance.
  3. Finally, you don’t always have 100% flexibility in how you use the funds. It all depends on the terms of your policy, so make sure to read the details before signing up.

Should You Get Long-Term Care Insurance?

Many people ask themselves if they can afford the cost of long-term care insurance. But maybe they should be asking themselves if they can afford the cost of long-term care without insurance? The decision on how to approach your insurance is ultimately up to you, but most people in the United States are better off with long-term care insurance than without it.

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Eric Rosenberg is a personal finance expert residing in Southern California. He holds a BSBA in finance from the University of Colorado and an MBA in finance from the University of Denver. He has over a decade of experience writing about financial topics online. His work has been featured on Business Insider, Investopedia, The Balance, Investor Junkie, and a wide range of quality financial publications.

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