Long-term care (LTC) is a daunting reality that many are not prepared to face. For adults age 65+, there is a 7 in 10 chance that you will develop LTC needs. While not everyone requires the same level or duration of care, there is a high probability that you will require some level of assistance. If it came down to it, how would you deal with such needs? Everyone should have a plan in place and review all options to ensure they are prepared for any health event that comes their way.
Cost of care
Professional-level care is provided through at-home care, community-based living facilities, assisted living, and nursing homes. The choice often depends on the specific needs and severity of one's health conditions. The more care one requires, the more likely it will be for a higher cost.
While it will vary depending on location, the US national average for 2023 is quite high across the board. For average monthly costs, one could be looking at $6,292 for an in-home health aide, $5,350 for assisted living facilities, and $9,733 for a private room in a nursing home. It’s important to note Medicare does not cover LTC costs, and while Medicaid does, it comes with strict income and asset limits.
Payment options
Where does that leave you? You could pay the cost out of pocket, rely on family or friends for care, or plan for long-term care through insurance. Many will take the family/friends route, which isn’t a bad option, but it can place significant stress and pressure on your loved ones.
They also may not have the time or experience to give the required attention or provide the level of care needed. That gives you the option of paying out of pocket, most likely burning through your savings very fast, or planning with long-term care insurance options.
Long-term Care Insurance (LTCi)
Long-term care insurance (LTCi) is broken down into two different options, Traditional LTCi and Hybrid Life/Annuity with LTCi attached. Both options should only be used for the LTC protection they provide, not as an investment vehicle for other purposes.
Traditional LTCi operates like any other insurance policy because you pay an annual premium and get a stated amount of coverage. This option is more suitable for those with smaller amounts of assets that are at a younger age. The insurance premium will increase as you age, and the money you pay is non-refundable, even if you never need long-term care. This can be the biggest argument against it for most- why pay into something you may never use? The answer is simple: it protects you against the risk of needing care in the future. Luckily, in recent years, more options have become available to solve this issue through hybrid policies.
Hybrid policies come in the form of life insurance or an annuity with a LTC rider. While both types of policies operate in a similar manner, specific details can help determine which option is best for you. We’ll explore the general benefits of each type of hybrid policy to help you make an informed choice. For these policies, you typically would make one lump sum payment or pay a larger amount over a few years rather than annual premiums. Along with the LTC benefit, they also come with a death benefit. This means you aren’t just paying in your money that you may never see again. The money can be passed to your beneficiaries if you pass away without ever using LTC. Additionally, for most policies, you can take money while you are still alive through surrender values. Keep in mind if you decide to take that route, your benefits will decrease accordingly, and there may also be fees or penalties.
For both types of LTCi, benefits can grow, allowing you to have larger amounts to use on LTC if the need arises. They typically give a specific benefit period of 2 to 6 years for LTC, a maximum benefit amount, and a window of time prior to being able to receive the benefits. Some may come with additional benefits but may have added costs for them. Nearly all policies require a doctor to certify your condition before you can file a claim.
While the costs of these policies can be significant, the potential cost of not having adequate protection could be even greater. Contact us today to discuss your options and see if long-term care insurance is the right fit for you. Our team is here to answer your questions and help you make informed decisions about your financial future.
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