It may be hard to picture now, but as we age, many of us will need help with everyday activities like bathing, dressing, or getting out of bed. The big question is: How will you pay for that care when the time comes? Long-term care insurance offers a solution, helping cover costs that traditional health insurance and Medicare do not. Let’s dive into what long-term care insurance is, how it works, and why it might be a valuable addition to your financial plan.

Long-term care insurance is designed to cover the costs of services not included in standard health insurance, such as assistance with daily activities or specialized care for chronic medical conditions, disabilities, or disorders like Alzheimer’s disease. It can help pay for care in a variety of settings, including:

Nearly 70% of 65-year-olds will need long-term care at some point, with women typically requiring 3.7 years of care and men needing 2.2 years. Here’s why many people choose to invest in this coverage:

Long-term care can be expensive. In 2023, the median annual cost for a semi-private nursing home room was $94,900. Without insurance, these expenses can quickly deplete a retirement nest egg.

Having insurance gives you more control over the quality and location of your care. Without it, you may have to rely on Medicaid, which often limits your choices to facilities that accept government payments and may not cover all assisted living costs.

To purchase a policy, you’ll need to apply, answer health questions, and sometimes provide medical records or undergo an interview. Once approved, you’ll begin paying premiums based on your chosen coverage, which typically includes:

You become eligible for benefits when you’re unable to perform at least two of six “activities of daily living” (ADLs), such as bathing, dressing, eating, or using the toilet, or if you have a cognitive impairment like dementia.

Some policies include a shared care option, allowing couples to combine their coverage and draw from a shared pool of benefits.

Premiums vary based on factors such as age, health, gender, marital status, and the level of coverage you choose. For example, a healthy 55-year-old man might pay around $2,100 annually for a policy, while a woman of the same age could pay $3,600 due to her longer life expectancy and higher likelihood of making a claim.

The average premium for a couple in their mid-50s is about $5,025 annually for a policy that provides $165,000 in initial benefits, compounding to $400,500 by age 85.

It’s important to note that premiums aren’t guaranteed to stay the same for life. Insurers can request rate increases if claims exceed projections, and state regulators often approve these adjustments to ensure insurers can continue paying claims.

Long-term care insurance premiums may be tax-deductible if you itemize medical expenses. The deductible amount increases with age and only applies to tax-qualified policies, which meet specific federal standards. Be sure to confirm whether your policy qualifies.

You can purchase long-term care insurance through financial advisors like us at Florida Retirement Group (FRG). Some employers also offer group policies with potentially easier qualification requirements and discounted rates.

When considering a policy, compare quotes from multiple carriers to ensure you’re getting the best coverage for your needs. Look for features like cost-of-living adjustments to protect against inflation, shorter elimination periods, and higher daily and lifetime benefits.

While long-term care insurance is a wise investment for many, it may not be suitable for everyone. If you have limited income or savings, the premiums might not fit your budget. However, for those who want to protect their retirement savings, ensure access to quality care, and relieve family members of financial strain, this coverage can provide significant peace of mind.

Planning for long-term care is a crucial part of securing your financial future. If you’re ready to explore your options or want personalized advice, the team at FRG is here to help. Schedule a consultation today to discuss how long-term care insurance can fit into your overall financial strategy. Together, we’ll build a plan that ensures you and your loved ones are prepared for whatever the future may bring.

Article Source:

Marquand, B. (2024, September 11). Long-Term care insurance explained. NerdWallet. Administration for Community Living. How Much Care Will You Need?. Accessed Sep 11, 2024.  Genworth. Cost of Care Survey 2021. Accessed Sep 11, 2024.  American Association for Long-Term Care Insurance. Long-Term Care Insurance Facts, Data, Statistics – 2023 Reports. Accessed Sep 11, 2024.  Internal Revenue Service. 26 CFR 601.602: Tax forms and instructions. Accessed Sep 11, 2024.