Long-Term Care Insurance (Do You Really Need It?)

My family has been fortunate to not have had a family member spend a considerable time in the nursing home.

For families who have not been as fortunate, the whole experience can be a devastating one; emotionally and financially.

For those who were fortunate enough to have taken out a long term care policy, they won’t experience the mounting costs for nursing home care and mitigate the financial side, at least.

Even though most of us understand what we consider normal insurance policies, long term care policies can be complex and many choose to postpone them.

In this post, however, I want to talk about the cost of long term care in general and really dig into the importance of this kind of asset protection.

Why Even Consider Long-Term Care Insurance?

Research has recently indicated 69 percent of those turning 65 this year can expect to use long-term care.

The average stay is about 2 ½ years or about 30 months.

You think it sounds bad? It gets worse…

In a study done by Genworth Financial, nursing home care has gone up by 17 percent nationally, and they expect it to continue this trend.

What Is Long-Term Care (And What Does It Pay For)?

One of the most common misconceptions about long-term care is that consumers mistakenly believe Medicare will foot the bill for their long-term care needs.

In just about every situation, this idea couldn’t be further from the truth!

Medicare coverage will pay for a portion of at-home care, or a short stint in a nursing home, but there are very specific situations you have to meet to qualify for the Medicare coverage. In the vast majority of cases, you’ll be responsible for paying for these charges out-of-pocket.

This is where long-term care insurance plans come in. They will pay for care, even if you are diagnosed with a chronic health condition or disability. This could be care in a nursing home, an assisted living facility, or in your home.

Long-term care insurance is simple, on the outside.

You purchase a policy, and you decide how much coverage you would get paid out every day. Every company is different, but all of them have various requirements for you to be eligible to start receiving payments from your long-term plan.

Don’t let your finances be wrecked or rely on your family to pay for those bills. Long-term care insurance will ensure you or your family doesn’t suffer financially because of your health care assistance.

Buying Long Term Care Insurance

Just like any other policy, buying long-term care insurance can be a confusing process.

Today, there are fewer and fewer companies that still sell long-term insurance policies. The number of companies has drastically decreased since 2000.

In 2000, there were around 100 companies selling plans. 18 years later, this number has dropped all the way down to 12. Five of those are selling to groups and workplaces.

There are several ways you can buy a long-term care insurance policy.

Obviously, private insurance companies sell these plans. While there are fewer options, you’ll still have a dozen to choose from.

If you choose a private insurance company, you’re going to have to go through medical underwriting, which means if you have a pre-existing health condition, there is a chance you’ll be declined for your plan. If you already need long-term assistance, then you won’t have a chance of being approved.

Another option is to buy one from an employer-sponsored plan.

Some companies offer group long-term care insurance plans or have discounted individual policies. Just like an individual policy, every group policy is going to be different based on the provider and the plan.

Most employer-sponsored plans will not require a medical exam or any underwriting. The main problem with these policies is if you leave the company, you don’t have coverage.

If you think you won’t be able to get approved for a long-term care insurance policy because of your health, don’t count yourself out yet.

Every insurance company is different, and all of them have different medical underwriting they use. It’s vital you find the best company based on your health and your insurance needs.

Even if you were declined by one company, there is a chance you’ll be accepted for a plan with a different company.

Cost of Long-Term Care

According to The Senior List, the average American grossly underestimates how much long-term care is going to cost them. Almost a third of Americans believed home health care would cost them less than $533. In most cases, the real number is nine times that!

These numbers get even more staggering.

One year in a private nursing home, in a large city like Chicago, for example, costs $72,567! This compares to $52,362 throughout the rest of the state.

Where you live will definitely have an impact on your premiums, guaranteed.

Considering the average annual household income is only around $59,000, the nursing home costs about 1 ½ times that. Those figures aren’t expected to slow down anytime soon, with nursing home costs rising faster than the rate of inflation.

Cost of Care Survey

Assisted Living: A private one-bedroom unit in an assisted living facility in the U.S. has an average annual cost of $57,288. These facilities offer additional help for residents, but they are not as “extensive” as a nursing home.

Home Care: There are two types of home health care, and each of them will differ slightly in how much they cost every year.

1. The first type is “homemaker services,” which includes basic tasks to help the patient stay in their home. This can be anything from cooking meals to going to the grocery store. The average annual cost of a homemaker service aid is just shy of $63,108.

2. The other type of home care aid is “home health aide,” these are the health professionals that live in the home with the patient and offer more extensive services. The average cost of a year of home health aide is just over $65,544.

Now, consider that Medicare is good for short-term recovery situations since it covers 100% for first 20 days and then 80% for next 80 days. Purchasing a good Medicare supplement plan will cover the other 20%.

Adult Day Health Care: First-year research findings indicate the average annual cost for five days a week in an adult day health care facility is $18,200 nationally. The comparable cost in Chicago is $13,156, and $15,959 throughout the rest of the state.

Consider Who Pays For the LTC Policy

For those of you reading for your parents’ sake, and not yours, consider who will be footing the bill. Adult children often find themselves paying for their parents who cannot afford it themselves.

Sometimes, taking on a small premium payment now will save you thousands in the future.

Final Thoughts on Long-Term Care Insurance (Do You Really Need It?)

Long-term care insurance is often overlooked until a crisis strikes, leaving families emotionally and financially burdened. This article emphasizes the importance of understanding and considering long-term care insurance. As research shows, a significant percentage of people will require long-term care as they age, and the costs are substantial.

Long-term care insurance can be complex, but it serves as a crucial asset protection tool. With the rising expenses associated with nursing homes, assisted living, and home care, planning for long-term care through insurance is a prudent financial decision that can ease the emotional and financial strain on families in times of need.