Many people mistakenly think their health insurance or Medicare will pay for any long-term care services they may need at some point. But health insurance really only pays for doctor and hospital bills. If you develop a chronic illness or become disabled and are unable to care for yourself for an extended period of time, you’ll need long-term care services. And these services aren’t cheap. Full-time nursing home care averages $69,000 to $78,000 per year or 8 hours per day of home health care can cost $43,000 to $70,000 annually.
Who Needs Long-Term Care Insurance?
If you can afford long-term care insurance, you should probably consider it. Why? Because the cost of long-term care, should you need it, can quickly deplete your life’s savings. For instance, having a home health aide visit just three days a week can cost more than $20,000 annually. Full-time nursing home care, the most expensive type of care, now averages $69,000 to $78,000 per year. In some regions of the country, like the Northeast, the cost may be twice that amount.
While financial considerations cannot be understated, long-term care insurance isn’t only about money. It’s also about peace of mind. Having it ensures you’ll have access to first-rate care when you need it. It also means you won’t have to be dependent on others or be a burden to your children.
What are the odds you’ll need long-term care insurance? Greater than you might imagine. There’s about a 70 percent chance you’ll need some type of long-term care after age 65. And long-term care services are not just for older people. A young or middle-aged person who has been in an accident or suffers from a debilitating illness may very well require long-term care services. In fact, 40 percent of patients receiving long-term care are under age 65.
If you can afford to pay for care without significantly impacting your assets, you may not need long-term care insurance. Conversely, if your assets, not including your home, are less than $80,000 if you’re married (or $30,000 if you’re single), you may not be able to afford the premiums. But If you’re somewhere in between, long-term care insurance should be part of the discussion the next time you sit down with an advisor to review your financial plans.
When Should I Buy It?
As with most kinds of personal insurance, the younger you are when you purchase long-term care insurance, the lower your premiums will be. Once you own a policy, premiums generally don’t increase with age, unless an insurance company raises them for a whole class of policyholders.
When you consider that 40 percent of those receiving long-term care are under age 65, you should at least give some thought to buying coverage when you’re still relatively young. Doing so should allow you to lock in a low rate while providing you with coverage that may be needed sooner than you think. Also, be aware that most companies won’t sell individual policies to people under age 18 or over age 84.
If you can’t buy as much coverage as you think you need, consider buying an affordable plan now and enhancing it later when your financial situation improves.