What You Need To Know About Long-Term Care Insurance


Long-term care is an emotional topic. It can be difficult to think about yourself or a loved one in a state of not being able to perform daily tasks. But avoiding the topic can lead to exorbitant payments in retirement. In fact, by the time a person reaches 65, they have a 50% chance of requiring paid long-term care someday. 

Without the right plan or insurance coverage, you and your family could be on the hook for this costly care. Planning for your long-term health needs in retirement is one of the biggest pieces of your retirement plan and for some people, that plan may include long-term care insurance. 

What is long-term care insurance and how can it impact you? Let’s take a look.

Understanding long-term care

A person requires long-term care when they need help performing daily tasks like washing, dressing, eating, and more. These services can be done in your home, nursing home facility, assisted living, or an adult daycare center. 

This type of care isn’t covered by traditional health insurance providers, and if you are enrolled in Medicare that system won’t cover you for long-term care either. Medicaid also isn’t an option for many families as it requires a near depletion of your savings accounts to be eligible and doesn’t provide you with much flexibility or choices in the type of care you receive. 

Government assistance for long-term care is all but a pipe dream. So unless you have the funds to pay for services out-of-pocket, long-term care insurance can be a good option to consider.

How much does care cost?

Long-term care can eat up a big portion of your nest egg if you don’t plan for it properly. According to the most recent Genworth cost of care survey, the national average for a private room in a nursing home facility is $102,200 per year, $8,517 per month, or $280 per day.

These astronomical costs can exhaust your savings quicker than you might think seeing as the national average of a 401(k) balance for retirees is under $200,000. That would cover less than two years in a nursing home, leaving many families looking for alternatives to supplement the costs of long-term care.

How long-term care insurance works

In order to qualify for long-term care insurance, you will need to fill out some forms and most often take a health screening to scan for any health issues that may deem you ineligible for coverage.  

Once you are approved, you are able to select the amount of coverage you want which often comes out to a per day maximum and a lifetime maximum coverage. Many policies will require you to pay for care out-of-pocket for a certain period of time (elimination period) usually between 30 and 90 days at which point the insurance company will start to reimburse you for expenses.

Before insurance kicks in, most policies require a formal review of your medical documents and an in-home evaluation by a nurse. This establishes your plan of care which must also be approved by the insurance company, so there are a good number of steps to complete before you receive your benefits.

Once you are eligible for care and have begun seeking paid services, your long-term care insurance will cover you for your daily maximum up to your lifetime amount. Spouses have unique opportunities when shopping for policies. Be sure to work with your planner to understand your needs and what type of policy might make sense for you as a couple. 

Long-term care insurance requires ongoing payment of premiums which is an important cost to plan for. According to the American Association for Long-Term Care Insurance (AALTCI), premiums have remained consistent from 2019 to 2020. 

The price for premiums shifts based on your age and marital status. Women often have higher premiums due to the fact that they are more likely to live longer and make claims. Let’s take a look at some 2020 figures

  • The average annual premium for a 55-year-old couple is $3,050
  • For a single, 55-year-old man, the annual premium averages $1,700 which is significantly lower than in 2019 at $2,050.
  • The average premium for a single woman is $2,675 which remains relatively consistent with 2019 numbers.

When and why should you buy a policy?

The AALTCI found that as of the start of 2020, 7.5 million Americans had some sort of long-term care coverage with insurance companies dolling out over 11 billion dollars in benefits the previous year. What’s more, is over half of insurance claims happen among people who are 80 or older. 

Waiting to purchase long-term care insurance until you need it isn’t really an option. So when is the right time to buy long-term care insurance and how can you tell if this type of coverage is right for you? 

The right time to purchase your policy depends on your unique needs and health condition. Most advisors recommend purchasing a policy in your mid-60s. For those with strong health records, people in their 60s can often still qualify for reasonable premiums and don’t have to pay for the premiums as long before they can claim benefits. While you can purchase the insurance when you are younger in your 40s or 50s, statistically, you won’t be claiming benefits for another 30 plus years which is a long time to be paying thousands of dollars in premiums. 

With 50% of people requiring some type of long-term care coverage, the odds are that many will require this service. The question then becomes if you need insurance or if you are confident in your assets to cover any care you may require. Another consideration is your family health history and the likelihood of developing certain illnesses like dementia and Altizimers. 

Buying long-term care insurance really comes down to two things:

  • Peace of mind
  • Flexibility in care options

When you have long-term care insurance, you are able to rest easier knowing that you will have help to cover the costs of care should something happen to you or a loved one. With insurance, you also have more flexibility for the type of care you can receive and which facilities will admit you as a patient.

How your financial planner can help

Retirement planning can be filled with topics that you don’t like to think about including estate planning and long-term health needs. But planning for these events when times are good will make transitions for loved-ones smoother when a situation does arise. 

Your health is one of the most important parts of your retirement plan and one that shouldn’t take a back seat. With healthcare costs and long-term care costs continuing to rise, making a comprehensive plan that takes these costs into consideration will help you better prepare for the future. 

Long-term care insurance is a good option for many families. Our team at Goepper Burkhardt is passionate about helping you create a holistic plan for your healthcare needs in retirement. Finding the right long-term insurance plan for you may take some time. But take comfort in the fact that our fee-only fiduciary firm has your best interests at heart and will always provide you with unbiased advice that we feel is right for you and your family.

Ready to learn more about how long-term care insurance could be a part of your retirement plan? Give us a call today

Previous Post
How To Effectively Balance Financial Priorities, The “Sandwich Generation”
Next Post
Can You Work And Still Collect Social Security Benefits?

Related Posts