According to the U.S. Health and Human Services Department, roughly 60% of those turning 65 can anticipate using some form of long-term care in their lives including nursing homes, assisted living facilities,or in-home care services.
CNBC’s recent article, “Not having long-term care insurance can be ‘the single biggest devastator’ of your financial plan,” reports that over 8 million Americans have long-term care insurance. However, the cost of that insurance is rising rapidly. This increase is because of several factors, including the fact that companies under-priced their policies for years and misjudged how many would drop coverage.
Because of those rising premiums, some individuals may choose self-insurance or saving a pool of money to earmark for long-term care. Even with these increases, you should consider purchasing some form of coverage, such as Medicaid. This is because not being insured can be the biggest devastator of a financial plan.
The rule of thumb has been to buy LTC coverage at age 55. However, it really depends on your health situation. The odds of being able to qualify for coverage at age 60 compared to age 30 or 40 is vastly different.
A traditional LTC policy will cover the costs of care for a certain period of time, generally up to six years. The amount of coverage is based on the average cost of care for your location. Most insurers offer it in the form of a monthly benefit, and possibly with some inflation protection.
There are also various hybrid policies that cover long-term care costs but become life insurance paid to named beneficiaries if the long-term care benefit is not used. Of the 350,000 Americans who purchased long-term care protection in 2018, 85% chose the hybrid coverage.
Medicaid is another option, particularly if you don’t have a way to save. To be eligible, you should work with an attorney to find out how you can shield your assets before you need care.
Reference: CNBC (October 14, 2019) “Not having long-term care insurance can be ‘the single biggest devastator’ of your financial plan”