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Do Retirees Need Long-Term Care Insurance?

Post date: 3/23/2016

Long-term Care InsurancePlanning for your own long-term care can be an unsettling topic, but being prepared to handle life’s challenges as you age is an important step for ensuring a comfortable future. According to the Department of Health and Human Services, 70 percent of people over the age of 65 can expect to need some type of long-term care.

Unfortunately, long-term care services often carry a hefty price tag, making the financial side of planning ahead complicated and stressful. Many older adults are investing in long-term care insurance to help cover future costs and make sure they can age in place —but is it something you really need?

Since the concept of long-term care insurance is relatively new, you probably have plenty of questions. Today we’re delving into the pros and cons of purchasing this type of coverage so you can make an informed decision.

But first, let’s back up a bit and start with the basics.

What is Long-Term Care Insurance?

If you aren’t familiar with long-term care insurance, a few things distinguish it from traditional health insurance. Since long-term care varies from person to person, insurance policies tend to come in a many options. Policies are typically designed around a set daily amount to cover services and support that aid with activities of daily living, such as bathing, dressing and eating.

Depending on the policy, accepted services can take place in many settings, including your home or a retirement community. However, despite the availability and flexibility of long-term care insurance plans, the jury is still out on whether they are a good investment.

The Pros of Long-Term Care Insurance

The cost of long-term care varies widely depending on your needs and location. According to a 2014 survey from Genworth Financial, the average cost of one year in an assisted living facility is $87,000 for a private room—and that number jumps to six figures for more expensive locations like New York, where the average is $136,000.

The cost of long-term care insurance, however, often means spending only a few thousand dollars each year for a potential lifetime of coverage. This can make it a very affordable option for older adults who may need several years of long-term care.

The peace of mind that comes with knowing you’re covered gives you one less thing to worry about during what can often be a stressful and confusing time. Adults who purchase plans well before receiving membership benefits can also save money with lower premiums and inflation protection.

Yet the decision to purchase long-term care insurance isn’t as cut and dry as simply saving money.

The Cons of Long-Term Care Insurance

Without a crystal ball, it’s impossible to know if you’ll need long-term care, what kind you’ll require to stay independent or for how long. The cost of long-term care insurance goes up considerably the longer you wait to enroll.

Even signing up early doesn’t necessarily mean you won’t eventually be paying more than expected. Rates aren’t typically guaranteed and most plans have rate increases between 3 and 5 percent per year. While the average older adult only needs long-term care for less than three years, some—like patients suffering from dementia—could need support for a decade or more.

Additionally, the rising cost of care could mean your plan doesn’t cover everything you need. Some long-term care insurance plans have waiting periods (from 30 days to 365 days) before you can receive benefits, and many plans limit the total coverage they will provide to a certain future dollar amount.

Making the Decision

Investing in long-term care is a personal decision and only you can determine if it’s the right choice for you and your family. Weigh the pros and cons to decide if your individual situation—taking into consideration your age, health and finances—makes it a worthwhile investment.

Long-term care insurance can be helpful, but there are more comprehensive and cost-effective opportunities available. Learn more about Sun Health at Home and how it compares to long-term care insurance.

You can also sign up for a free, no-obligation discovery seminar.