According to Covering Katy’s recent article entitled “How to Protect Yourself From Long-term Care Cost,” to answer the question of long-term care, think about two variables: your likelihood of needing long-term care and the cost of the care. Considering these two variables will help you answer the question of whether or not you should purchase long-term care insurance.
Government statistics show that a person who’s 65 today has nearly a 70% chance of eventually needing some kind of long-term care. The average cost for a private room in a nursing home is about $100,000 per year, and a home health aide costs about $50,000 per year. When you do the math, your chances of needing long-term care are good and it’s expensive. If you needed several years of long-term care, it could seriously deplete your savings.
Since Medicare typically pays only a small part of long-term care costs, you should consider the following options for meeting these expenses:
You could “self-insure” against long-term care expenses, by setting aside some of your investment portfolio for this. However, it looks like you’d have to save a lot of money before you felt you were truly protected. This could be especially tough with the need to save and invest for the other expenses associated with retirement.
When you buy long-term care insurance, you’re moving the risk of paying for long-term care from yourself to an insurance carrier. Some LTC policies pay costs for a set number of years, while others cover you for life. Shop around for a policy that offers the combination of features you think best meet your needs. Long-term care gets more expensive as you get older. Therefore, if you’re interested in this type of coverage, don’t delay in your search.
A “hybrid” policy, like life insurance with a long-term care/chronic illness rider, combines long-term care benefits with those offered by a traditional life insurance policy. As a result, if you were to purchase a hybrid policy, and you never needed long-term care, your policy would pay a death benefit to your beneficiary. Conversely, if you ever do require long-term care, your policy will pay benefits for those expenses. The amount of money available for LTC can exceed the death benefit dramatically. There are quite a few different types of hybrid policies, so do your research before choosing a policy.
While you may decide you’re willing to take the chance of never requiring any type of long-term care, if you think that’s a risk you’d rather not take, look into all your coverage options thoroughly.
Reference: Covering Katy (Jan. 13, 2020) “How to Protect Yourself From Long-term Care Costs”