Do You Need Long-Term Care Insurance?

Long-term care is an emotional topic. It’s challenging to navigate conversations about your health as you age, leaving many families unprepared when these needs arise. Long-term care not only comes with emotional baggage but also a substantial price tag.

For some, long-term care insurance can help. 

Today, we are going to walk through the ins and outs of long-term care insurance and how to prepare for your and your family’s health throughout retirement. 

What is Long-Term Care?

It’s estimated that those over 65 have a 70% chance of requiring long-term care at some juncture. Planning for it now can help alleviate stress and confusion later on. Proper planning also gives you more options for care, giving you a better chance of receiving the best care for your situation. 

Many people automatically equate long-term care to an insurance policy. But before you bring brokers into the conversation, it’s best to fully understand what long-term care means. 

Long-term care covers an array of services that facilitate a person’s unique health needs over a set period. People who require long-term care often need help with daily activities like washing, dressing, and eating. Many facilities can help perform this care like a nursing home, assisted living facility, adult daycare center, home care, and more.

Does Medicare Cover Long-Term Care?

The short answer: no. Long-term care isn’t often covered by health insurance (or disability insurance) including Medicare. Some expenses could be covered by Medicaid, but only if the beneficiary has a specific financial need, which many people won’t qualify for. 

Long-term care can be quite costly. The national cost for a private nursing home is just over $100,000 (nearly $117,000 in Michigan) per year according to Genworth, which could easily take a toll on your retirement assets. Without proper protection, you and your family could be on the hook for covering these expenses out-of-pocket.

To help mitigate this risk, some people purchase a long-term care insurance policy.

How Does Long-Term Care Insurance Work?

You can purchase a long-term care policy through several private insurance companies, selecting the right coverage amount for your needs. Many companies institute maximum daily and lifetime benefits i.e they would cover up to $200 per day and $400,000 total.

To qualify, you need to fill out some paperwork and likely undergo a medical exam, the results of which will determine your eligibility for coverage. Once you’re approved, you begin paying premiums. 

While every policy is different, for many policies, benefits kick-in when you are unable to perform at least two out of six ‘activities of daily living’ (ADL). These activities include:

• Bathing
• Dressing
• Eating
• Toileting (bathroom care)
• Transferring (getting in and out of bed, chair, or other seated position)
• Caring for incontinence (uncontrollable bladder)

Once you know you need care and would like to make a claim, the insurance company will review your medical documents, history, and doctor’s recommendations. A separate nurse evaluation may also be required. Your healthcare team will then outline a plan for your care, which the insurance company will review before they approve your claim.

Many long-term care policies have an elimination period of 30, 60, or 90 days. This period means that you are required to pay for care out-of-pocket before benefits are given. Once the elimination period ends, you’ll receive benefits according to your plan for care and policy specifications. 

What Are The Costs of A Policy?

You pay for your long-term care policy through ongoing premiums. The cost of premiums varies drastically, depending on your unique situation. Several factors work together to help determine the cost of your policy:

• Age
  • Policies tend to be more expensive for older beneficiaries.
• Health
  • Those with greater health risks (underlying conditions, family health history, etc.) will likely have higher premiums.
• Gender
  • Premiums tend to be more expensive for women (nearly $1,000 more on average) due to longevity—the CDC estimates that women outlive men by 5 years.
• Martial status
  • Married couples tend to have lower premiums than single people.
• Amount of coverage
  • The more coverage you want, the higher your premium will be. Remember, your coverage translates into daily and lifetime maximums.
• Insurance company
  • Different companies will be more or less cost-effective. Work with your advisor and independent broker to find the right company and coverage for your needs. 

Premium prices are also impacted by other parts of your policy like the coverage period and elimination period. Plans with longer coverage periods and shorter elimination periods will likely be more expensive, for example.

When Should You Purchase A Policy?

While there is no hard and fast rule about long-term care coverage, many advisors recommend researching and purchasing a policy in your mid-50s to mid-60s. This way, you start paying premiums closer to the time when you can collect the benefits. 

By delaying past 65, your premiums will increase exponentially or you might become ineligible for coverage altogether. Long-term care insurance certainly isn’t the type of policy you can purchase when you need benefits—it’s a policy designed to help protect you in the future. 

You also don’t want to buy a policy too early (your 30s and 40s), because you could be saving and investing the thousands of dollars you would be paying premiums. The right time to purchase a policy for you will be specific to your needs, health plan, family history, and retirement assets.

Is Long-Term Care Insurance Right For You?

Requiring some form of long-term care might be more common, but that doesn’t necessarily mean that purchasing an insurance policy is right for you. A long-term care policy is designed to help cover the exorbitant costs of long-term care, but there are other ways to settle the tab.

Perhaps you are in good health, have a strong family health history, and a much higher-than-average savings plan. This combination might make you more confident that your current assets could cover any costs incurred. You might also already have a plan to move in with your adult children, entrusting your care to your family as long as possible. 

While there are alternative options, many people find that having a long-term care policy provides clarity for the future and added flexibility for care options. A robust policy could protect you should an unexpected health issue arise and you and your family need more support. 

You don’t want to walk into retirement unprepared for your changing health needs. The average couple is expected to spend $295,000 on medical costs in retirement excluding long-term care. With long-term care costing about $300 per day, even one year in a nursing home could put your nest egg in jeopardy. 

Take some time this year to prioritize your future health needs. Don’t let your emotions get in the way of creating and implementing a plan that will be best for you. Work with your financial advisor to talk through your needs and see if a long-term care policy is right for you. 

Our team at Legacy Wealth wants to help you live a happy, healthy, and fulfilling retirement, and proper healthcare planning plays a significant role in achieving that goal. Would you like to discuss your unique risk management plan? Schedule a 15-minute call with us today. 

Note from the author: When we publish our blogs we attempt to use the most current information. Now that this blog is a year or more old, we want to advise you that some of this information may be dated, although we believe that the base of the blog still contains lots of valuable information. If you ever have questions about the contents of our blog, please reach out to us at info@legacy-wealth.com.

General disclaimer: Advisory services are offered through Legacy Wealth Advisors, LLC dba Legacy Wealth Advisors, an Investment Advisor in the State of Michigan. The information contained herein should in no way be construed or interpreted as a solicitation to sell or offer to sell advisory services to any residents of any State other than the State of Michigan or where otherwise legally permitted. 

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