Long term care insurance is a particularly important type of insurance. This type of policy is meant to provide for your personal care and wellness when you reach an age or health condition where you need assistance with the basic functions of living. Some of the activities and needs that long term care insurance can help provide for include:
- Bathing, dressing, using the toilet
- Taking medications in the proper amounts at the proper times
- Eating, cooking, laundry, housework
- Transport to a bed or chair
- Pet care
- Using communication devices
- Responding to emergencies such as fire alarms
- And many other living needs
Why you may need long term care insurance
Long-term care varies from person to person and statistics indicate that a person turning 65 years old today has about a 70% chance of needing long term care. Women on average need more long term care than men. The average length of stay in long-term care is 3.2 years. And, 20% of people will need more than 5 years of long term care.
- Five years of long term care is a significant amount of protection. This enables you to afford not just long term care, but the best standard of care available in a facility of your choosing or with in-home help to stay in your home.
- Long term care is expensive. Whether provided in a facility or nursing home or having a professional care worker visit or live at your home, caring for your health and wellness needs is expensive. It’s not unusual to find that a quality nursing home can cost a few hundred thousand dollars a year. It’s also expensive to hire an RN to provide live-in services.
- Think also about the demands your health care needs may place on your family members. If you cannot afford long term care, family members may need to devote a significant amount of their time, energy and money to take care of you when you’re less able to function on your own.
Effect of your care on family members
Again, according to LongTermCare.gov, 80% of people helping their relatives in their homes are unpaid workers. This means your relative is not a hired and trained healthcare professional, but it’s now their job to do much of the work of one.
Unpaid workers/your relatives would spend an average of 20 hours a week taking care of you. That’s quite a strain for them. You also don’t get the benefits of having a medical professional’s trained level of care. Clearly, long term care insurance is a very important issue to address with your financial planner who can walk you through the pros, cons and revelations of long term care insurance.
The Pros of Long Term Care Insurance
- More likely to be able to afford a stay in a higher-quality, reputable care facility. Your long term care insurance would pay for a certain amount of the costs per month or annually.
- There is less pressure on your assets during your stay. This will allow you to retain more of your savings and perhaps have more money to leave to your relatives someday.
- You gain peace of mind in the present. Knowing that you are well-protected should you need any long term care in the future can help relieve any anxiety you may have.
The Cons of Long Term Care Insurance
- Long term care insurance is expensive and premiums can go up. That’s often a big, unpleasant surprise for many people. Many assume they were locked into a premium amount when they got their long term care insurance policy. But times have changed. While long term care policies in the past may have allowed a single payment or payments made to completion over a ten-year period, that is no longer the case in most reputable and solid insurance plans. We keep a close eye on premium rules at long term care insurance plans and for other insurance plans for just this sort of shift in the industry. We do this to protect our clients from unpleasant realities such as hefty premium increases.
- You don’t know how long you’ll live. You may look at long term care premium costs now, during your working years, and think they’re affordable. But considering that we’re living longer and may not require long term care until we’re in our 80s and beyond, there’s no way to tell what costs will be then. This is especially dangerous since you’ll be very unlikely to have the same kind of income arriving when you’re in your 80s as you do now.
- You may have a plan you can’t afford. If you purchased a long term care insurance policy a while ago, you may wind up in an unfortunate ‘club’ of people who find themselves unable to afford it later, long before you’re able to use it. If you need to cancel your policy, you most likely will lose everything you paid into your plan.
What should you do?
Determining whether you can afford long term care insurance is a complex financial issue for most. This is one area where you should seek guidance from a financial advisor to determine what is right for you. Policies and premiums vary significantly by insurer. You have to know what you are doing to ensure you get the best long term care protection for you and your loved ones. Your advisor can help you continue on the path to being well-protected into your later years.
Being able to afford long term care if and when you need it is something you need to plan for long in advance. Whether you choose a long term care policy or invest what you would pay for a long term care policy in another financial instrument, you should speak with your financial advisor to make the best possible choice based on your situation.
Planning in advance and making a sound decision in how you will fund your long term care needs will enable you to afford the best care and for your health and wellness and alleviate the burden of care from your family members. Contact us to help you navigate this complex piece of your financial plan.
Listen to our podcast on what you should think about and ask your financial advisor before you invest in a long term care policy.