Long-Term Care Strategies

There’s a good chance that by the time you turn 65, you’ll need to consider getting a long-term care (LTC) policy. While this isn’t a financial risk people always think to plan for, for most people, the average out-of-pocket amount for long-term care is $140,000. There are only around 7.2 million Americans who have long-term care insurance that covers things like assisted living, in-home care, or the costs of a nursing home – things that Medicare does not cover.

Here’s are some things you need to know about long-term health care insurance:

The uncertainty of Long-Term Care

Length:

The amount of time that a 65-year-old will need paid care varies, but for most, it’s less than a year.

Cost:

The average yearly cost of a nursing home will depend on your state. The overall average cost in the US is $85,800, with the most expensive state being $150,200 and the lowest being $54,800.

What you’ll pay:

Right now, there are one in four people who are 65 years old who are looking at more than $50,000 in lifetime out-of-pocket, long-term care costs.

Traditional policies are not as popular

Traditionally, long-term care insurance consisted of paying a yearly premium in exchange for financial help for daily activities like dressing, bathing, and eating meals. Today, the terms include $160 a day for nursing home care, a threemonth waiting period before insurance begins, and coverage for a maximum of three years.

These long-term care policies have faced premium peaks and insurer losses due to incorrect predictions by the insurer on the amount of care they would be providing. Thus, sales for these long-term health care insurance policies have drastically declined, with fewer than 15 insurers offering them.

You might not need insurance, but you need to make a plan

The cost of long-term care insurance policies is around $2,700 a year, making it difficult for many Americans unless they have a spouse (there are discounts for couples, usually 30% off the cost of separately purchased policies). If you do not have many assets, you may be able to cover LTC costs via Medicaid. If you have a large amount of money saved, you can probably pay for your care out of pocket, but make sure to consider all factors besides cash. Things like home equity, children who will help if needed, or a family history of dementia that could put you at a greater risk.

If you use less than four percent of your savings for living expenses each year, you might be fine without long-term care insurance, however, you should plan for it just in case. To do this, you’ll need to save more than you originally planned and also remove your LTC money from the account you use for everyday use.

New insurance options

While the popularity of traditional long-term health care insurance has declined, whole life insurance has taken its place, allowing people to draw from it for their long-term care needs. And unlike older long-term care insurance, these “hybrid” policies let you leave the money to your heirs in the event you don’t need longterm care.

But older policies cost less

If you’re only concerned about cost-effective options, even if you won’t receive any money back if you never need to use it, a traditional long-term care policy may be best for you. Hybrid policies are typically more expensive than traditional insurance, even though they offer the same coverage. The difference is, a hybrid guarantees that you’ll get money back.

You may want to choose a hybrid policy if your other option is to use savings or if you have a different whole life policy that has a large cash value. In this case, you can roll over an existing annuity or life insurance policy

The sooner the better

Long-term care insurance costs increase as you age. The best time to look for a long-term care policy is in your 50s or early 60s before premiums are too high or your health declines. At the age of 65, most premiums are between 8 and 10 percent higher than they would be at age 64.

When deciding where to shop, look for an independent agent who sells multiples policies from various companies instead of choosing a single insurer. In addition, if you want someone who has extra expertise and more policy options, find an agent who sells long-term care partnership policies as they are part of a continuing education program for insurance professionals.

Disclosure: Like other forms of insurance, most long-term care (LTC) policies have caps or maximum benefit amounts. That means almost no policy will pay for the total cost of your long-term care. LTC insurance reduces the amount you’re responsible for paying. LTC policies have a list of trigger events, which mark the point at which you qualify for benefits. Not all policies cover cognitive impairments, such as Alzheimer’s disease, when you’re still able to perform most activities of daily life. Please review all terms and conditions prior to purchasing any LTC policy.

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