Is Long-Term Care Insurance Right For You?

The aging of America has sparked a number of debates about how to care for older Americans who are living longer.

Recent statistics show 75 percent of adults aged 65+ will require some care in their homes, and half will require some form of assisted living facility or nursing home. The U.S. Department of Health & Human Services predicts the average nursing home costs will increase to $100,000 per year in 2015 – a 96 percent increase from the $51,100 per year in 2000.

For many, long-term care insurance (LTCI) is a viable option to protect against the financial impact of long-term care. Some will choose to play it safe, while others either will not be able to afford or will choose not to insure themselves with LTCI. The benefits or ramifications of this decision will put every one of us in one of the following four categories. 

Lucky: Those who neither need long-term care nor have purchased LTCI. Statistics show that very few people over age 65 are in this category.

At peace, though frustrated: Those who are fortunate enough not to need long-term care, but who purchased an LTCI policy just in case.

High-risk: Those who need long-term care but do not have the LTCI to cover the cost. The needs for care could have a significant personal, financial and emotional impact on them and their family.

Prepared: Those who have LTCI and need it. These people typically see that LCTI was one of their best financial decisions because it gives them more control over the quality of care they receive while not burdening their family or draining their savings or retirement funds.

Ideal LTCI Candidates

LTCI can be expensive and increase in cost the longer you wait to start a policy. If you are you are between the ages of 40 and 84 and your net worth is $200,000 to $2 million, you are an ideal candidate for LTCI, because treatment for a chronic condition could wipe out your savings.

Things to Consider

Generally with an LTCI, you pay a premium over the life of the policy and when you need it, the policy pays a selected dollar amount per day for a set period of time.  The decision to purchase LTCI will revolve around a number of factors, including your risk tolerance, family health history, personal health history and finances. 

For those who opt to buy LTCI, there are a number of variables you will need to consider when looking at different plans:

• The waiting period before a plan will begin paying benefits
• Triggers or criteria that will trigger payment of benefits
• The duration of benefits
• Daily benefit amounts
• Range of care
• Inflation riders
• Guaranteed renewability
• Pre-existing condition clauses and any other exclusions
• The potential for premium increases
• Late payment grace periods
• Return of premium policy
• Tax benefits

Given the statistics, it appears LTCI has the potential to become as common as life insurance. Yet, it is new enough that it is not well understood. Ask your financial advisor or insurance advisor to help you with the options so you can make sure you don’t fall into the “high risk” category.