stethoscope with papers

We plan the best we can for our future by making sure we have safe-guards in place, such as savings, a retirement plan, health insurance and life insurance. It isn’t always pleasant to prepare for disaster and difficulty, but this planning makes hardships a little easier to bear. One additional scenario many Americans are planning for is the long-term care they may need as they age. The American Association for Long-Term Care Insurance reports that in 2012 over 8 million Americans were covered by long-term care insurance and over 264,000 people were taking advantage of long-term care benefits to pay for their care.

But long-term care insurance may not be for everyone. The monthly premiums can get expensive, especially if your income decreases as you age. As you research whether or not long-term care insurance is right for you, here are some answers to basic questions:

What is long-term care?

There may come a time in the future when, due to aging, illness or disability, you might need assistance performing the daily tasks of living, such as bathing, eating, walking, toileting, etc. You may only need assistance for a short period of time until you recover from an illness or surgery, or there may come a time when you need constant assistance for the rest of your life. You may need professional and/or medical assistance on a regular basis. This assistance is called long-term care. This care can be provided by a family member, but sometimes that isn’t an option. Nursing homes, assisted living facilities or in-home care services are some other long-term care options.

How can long-term care insurance help me?

Long-term care insurance helps pay for the expenses of long-term care. A common misconception is that the insurance will only help pay for a nursing home stay, but the truth is, it will cover a lot of other types of care, too. The insurance can even cover home care and help you maintain your independence  at home for longer. It can help pay for a caregiver to help you with daily tasks of living—and even help with tasks around the home, like cooking and light housework.

When planning for the future, it is hard to guess whether or not you will ever need long-term care, or how much you would have to pay for the services you might need. Depending on your income and your savings, you may be able to pay for services on your own. In the long run, that may be less expensive than paying monthly long-term care insurance premiums. On the other hand, a long stay in a nursing home can quickly drain your savings and even end up creating a financial burden on your family.

According to U.S. News and World Report, a stay in an assisted living facility, depending on what area of the country you live in, could cost you $50,000 or more a year, and a nursing home stay could cost over $100,000 a year. That can add up if you need care for many years, and statistics show that most adults who need long-term care need it for an average of three years. Can your savings pay for that? If you are single, have no dependents, and aren’t worried about leaving an inheritance behind, maybe your savings would be enough to cover it. But for many, long-term care insurance offers necessary financial protection and eliminates worries about the future.

What are the main things I need to consider when purchasing a policy?

According to the AARP, long-term care insurance policies vary greatly. It is important to consult a qualified insurance agent who can help you select a policy that is right for you. Ask around and find an agent who has a record of being honest and knowledgeable when it comes to long-term care insurance.

You will need to consider factors such as whether you can qualify for a policy, what monthly premium fits your budget, how much coverage you are likely to need, how long of a waiting period you want to set between when you begin using long-term care and when the insurance starts paying for it (a longer waiting period will mean lower premiums), and whether or not your policy will have inflation protection (experts highly recommend you have this). Weigh all of your options and select a policy that fits your goals for the future, including your budget now and for years to come. Take your time deciding—and don’t let anyone pressure you into buying insurance that you don’t want or need.

Can I use Medicare to pay for long-term care?

Many people believe they don’t need long-term care insurance because they will have Medicare. It’s true that Medicare does help pay for long-term care, but it has limits. The AARP explains, “Medicare only covers long-term care for short periods of time, such as rehabilitation after an injury or illness. It does not cover assistance with the activities of daily living that many older adults need to maintain their independence. Medicaid will cover nursing home care only if your income is below a certain level and after you’ve depleted almost all your savings.” These government programs have more limits than long-term care insurance.

Can I wait to purchase long-term care insurance until I need it?

With the onset of the Affordable Care Act, we are used to hearing about health insurance that can’t turn people away because of pre-existing conditions, but long-term care insurance does NOT fall under that category. If you wait until you are ill or suffering from declining health before applying for long-term care insurance, you will probably be denied coverage. It is best to purchase coverage when you are young and in good health. Jesse Slome, Executive Director for the American Association for Long-Term Care Insurance, says “Only 17 percent of people in their 50s are denied coverage, but that number jumps to 45 percent for people in their 70s.” Slome points out that the median age for people who are applying is 57, but it’s best to apply sometime between ages 52-64, before you qualify for Medicare.

 

There are a lot of decisions to make when it comes to your future and whether or not you should purchase long-term care insurance. Think about the kind of care you wish to receive as you grow older. Make a long-term financial plan. Study all of your options and do what is best for you and your future.