Long-Term Care Insurance

If you’re lucky enough to hit 65 then you’ve got a 50% probability of eventually needing long-term care at some point. If you choose to pay for this out of pocket then brace yourself for this next number we’re going to toss your way - $140,000. That’s what you’d owe, on average, and we’re willing to bet you don’t have that kind of cash simply lying around.

Long-term care, at least in the US, is one of those things that most Americans solely lack unfortunately. Premiums for traditional long-term policies are roughly $2,700 per year. If you have few assets you could get Medicaid to cover some of that, and if you have home equity for example, you could use that to make the costs more affordable. Long-term care insurance typically covers home modification, nursing home care, adult day care services, assisted living facilities, care coordination and in-home care. Getting back to Medicaid, this should never be (as long as you can afford it) your first choice in terms of coverage. Doctors across the US are reducing the number of patients they accept from Medicaid every year and this is understandably making it tougher for those folks who rely on Medicaid to find adequate care.

A semiprivate nursing home room costs approximately $85,775 per year. Assisted living will run you $45,000 per year and home health aid rates are $135 per day. Long-term care insurance will cover a portion of these amounts (again paying simply $2,700 per year). There are also plans where you can include what is known as an “inflation rider” which will increase your benefit over time (in line with inflation). A new type of policy now combines long-term care insurance with life insurance. This is a hybrid policy where you can access the death benefit while you are still alive to cover the long-term care. The death benefit is what your beneficiaries would have received in the event of your death. If you don’t need to tap into this then your beneficiaries would still get paid in full. These policies are attractive for some, but in general should be tapped as a last resort if for example you can’t qualify for traditional long-term care insurance.

So at what age should you buy? It might seem intuitive that buying a policy at 50 for example would be cheaper than later on. For a healthy middle-aged man (50), the premium is roughly $1,725 per year. If this policy remains the same until said man turns 95 he will have spent $77,625 in premiums. For a 60-year-old man, the estimated premium is higher - $2,710. If he stays healthy until 95, he will have spent $75,320.

It is cheaper to buy at 60 than 50, but the fear is that between that time someone might develop a medical condition that would prevent them for qualifying for coverage, or worse, result in a premium rise. If you have some sort of family illness that is keeping you up at night then perhaps buying the policy when you can afford it is the best route to take. After all, piece of mind is worth a whole lot more than the money you would save on extra premiums.

The best way to shop for long-term insurance is to first contact an independent broker. They will pour through the wide range of companies to find a competitive rate and a good match for your unique situation. This is an important decision, but one you shouldn’t stress over. Just be sure to go with a provider, relying on the government for your long-term care is definitely not advised.