Long Term Care Planning

Most people have to think about buying long term care insurance. Your parents may be considering it, whether they’re still working or retired. The purchase often presents the most nagging insurance question for people over 50.

What’s more, LTC coverage may not be necessary or affordable. Before buying, take the following into account:

Family status. Consider the financial risk of incurring out-of-pocket expenses for long-term care: impoverishing a spouse, partner, or other financially dependent family member. Single people don’t face that risk, so all other things being equal, they have less need for LTC insurance.

Affordability. Most LTC experts say the ideal candidates for long-term-care coverage are those who can comfortably afford the premiums and can handle premium increases, which are becoming quite common.

Your general financial picture also determines how affordable LTC policies are for you. One common measure is net worth, excluding the home, or more simply, the amount of investments and savings you expect to have after you retire. People with less than $500,000 in investments might not be able to afford LTC coverage.

Another more reliable measure of affordability is how much the insurance will cost as a percentage of your expected retirement income. If the premiums are likely to consume more than 10 percent of your income, you probably can’t afford the coverage.

Singles with more than $1 million in investments, and married or partnered couples with more than $1.5 million in investments, may want to consider self-insuring. If this describes you, though, remember that a long stay in a nursing home or extended home-health care could whittle down even a large nest egg.

Family health history. Not a perfect predictor, the health patterns of parents and grandparents can still indicate what the future may hold. If your parents experienced chronic health problems or other conditions that required prolonged care, this may argue in favor of an LTC policy.

Importance of passing on an inheritance.
If passing on an inheritance is important to you, an LTC policy could protect some of your assets for future generations.

When Should You Buy an LTC Policy?
Keep in mind that the annual premiums for LTC coverage are much higher if you wait until your 60s or later to take out a policy. Few experts recommend purchasing coverage before age 50.   After age 70, premiums may become prohibitively expensive.  Keep in mind that Long Term Care costs will most likely exceed your premiums.

While you’ll pay lower premiums if you buy a policy at a younger age, keep in mind that you’re likely to pay a long time before collecting benefits, if ever. The average age at which people enter nursing homes is 83.

Top Reasons To Obtain Long Term Care Insurance:

  • The government isn’t going to pay for long term care at home, in a nursing home, or in an assisted living center. Medicare pays 100% of long term care for 20 days and all but $95.00 per day for the next 80 days–after that nothing. However Medicare only pays for skilled care and most long term care is not skilled care.
  • The national average cost for nursing homes is approximately $105.00 per day. Assisted living ranges anywhere from $50 – $90 per day. If you live on the Eastern Seaboard you can easily spend $50,000 to $80,000 for a year’s stay in a nursing home. These costs are perfectly capable of wiping out a lifetime of savings, not to mention the emotional effect long term care has on a family.
  • A Harvard University study showed that 69% of single people and 34% of married couples would exhaust their assets after 13 weeks in a nursing home. 13 Weeks = 91 days!
  • At age 65, a woman has a 1 out of 2 chance of spending some time in a nursing home. A man has a 1 out of 3 chance. In the case of men, mortality catches up with morbidity.
  • Medicaid kicks in only after a person’s assets and dignity are gone. In many states the eligibility threshold for single people is $1,500 in assets. After all, Medicaid is WELFARE.
  • Children would like to help, but children often have kids of their own. They certainly can’t quit their jobs to care for their parents.
  • Health rarely improves with age. Buying long term health care insurance early not only locks in rates which you could not receive at a later date, but ensures you are covered when you need it the most.
  • You can’t buy long term care coverage at crisis time or only at the time you need it.
  • American’s have access to the best health care in the world, if they can pay for it.
  • Most people want to choose where they go instead of having to go where they are taken, and if independence is important to them, they will need to have either a large estate or adequate insurance.