Long-Term Care Insurance—Not for the Faint of Heart

Becky Botzet, CFP®, EA |

According to the U.S. Department of Health, 70% of people 65 and older will need some kind of long-term care eventually. It is also reported that although nearly one-third of today’s 65 year olds may not ever require long-term care or assisted living, one out five (20%) will need it for more than five years. The costs vary depending on the degree of care, see below for the median costs.

The average length of a nursing home stay is between 2½ to 3 years. Diagnosis of Alzheimer’s Disease could result in a much longer stay. You should also know that Medicare does not cover nursing home care except for limited stays after a hospital admission of three days or more, nor does Medicare pay for in-home care if it’s not skilled nursing care.

The question is: Can you afford your own long-term care if the situation rises or should you consider long-term care insurance? The decision to purchase long-term care insurance is very specific to your own situation.

As a general rule, we don’t typically recommend you insure the full amount of your anticipated cost. Consider that in a nursing home you will not have the other normal day-to-day expenses that we typically include in your retirement projections, such as vehicle expenses, travel and food. You will continue to receive Social Security and pension benefits to help cover costs.

The cost of long-term care insurance varies greatly. Even with the same exact situation, the cost you could get quoted with one insurance carrier can be significantly higher than another. As we recommend as with all types of insurance, work with an independent agent who specializes in long-term care and can shop many insurance companies for your best fit.

The American Association for Long-Term Care Insurance recommends the ideal age to look into long-term health care insurance is between the ages of 52-64. As with most insurance policies, there are many variations of coverage, such as individual or shared policies, daily benefit amounts, inflation riders, and varying maximum lifetime benefits. These factors, along with your current health and health history, will all determine the cost.

Long-term care insurance premiums range in the thousands per year, so it’s important to weigh the cost to the benefit and the risk. As mentioned above, every person’s situation is different so it’s important to consider your options and the impact of your financial plan.