While you may be aware you need the protection a life insurance or a health insurance policy provides, you may not have considered the vital role that long term care insurance could play in your life.
As people age, they inevitably need more extensive health care, and the cost of that care can be too much to bear. Long term care insurance can ensure those costs are covered.
Long term care can cover the cost of extended care given in a nursing home, adult day care, assisted living center, or even your own home.
As you near your 60s, you may want to consider the cost and benefits of long term care insurance for you or your loved ones.
According to Morningstar’s 2018 release of long term care statistics, 52% of people turning 65 or older will need long term care at some point in their lives. A stay in a nursing home costs anywhere from $70,000 a year on up. And in-home care cost around $50,000 a year in 2017.
If those numbers aren’t urgent enough, long term care costs are expected to increase around 4-5% a year. So, if you live past 65, there is a high chance you will need long term care at a substantial cost.
In light of these numbers you have to ask the hard question,
How can I afford long term care?
If you find yourself in need of long term care but wondering how to afford it, there are several options that you can consider, each of which comes with its own pros and cons.
- Self Fund
- Have Family Pay
- Medicare/Social Security
Perhaps the most obvious means of securing long term care is to pay for it yourself. To do so, though, could be financially challenging. If you choose to pay for your own long term care costs, you will need to have a decent sized nest egg set aside.
And don’t forget to earmark some of that money for your spouse as both of you could require long term care in the future. Your sex also factors into the equation. Ladies, you tend to live longer, so you can expect to be the one needing the long term care more, at least statistically speaking.
But the problem with self-funding is you really have no idea what the future holds. Maybe you are one of the fortunate individuals who will never need long term care. But if you do, do you have the funds set aside to cover the cost of long term care services?
In this equation, you should also consider your loved ones. If you spent your life creating wealth and you have always believed that one day you would pass on that wealth to your children, do you really want to spend it all in your final years, leaving little to nothing behind?
Have Family Pay
In addition to paying for your own long term care, you could also share the burden with your loved ones. If you suffer a debilitating sickness, injury, or cognitive impairment, your family or friends may be able to contribute to your care.
However, can you count on your loved ones having the money to pay for long term care services that may run over $100,000 a year? And are you willing to saddle them with such a difficult financial burden?
You might think Medicare or social security will pay for your long term care costs. While Medicare was designed to assist you with your medical costs, it is not intended to bear the full expense of long term care. The problem is, medicare might cover you for a short window, but it is not a long term care solution. Medicare does not pay for skilled nursing home costs after 100 days.
Social security is an equally faulty alternative to Medicare for funding your long term care. You may find it difficult to qualify, and there may not be enough coverage to go around by the time you need it. Regardless, social security benefits are not substantial, certainly not enough to cover the costs associated with long term care.
What, then, is the best way to pay for long term care? The value of long term care insurance cannot be overstated. With long term care insurance, you get leverage.
Maintaining your coverage is simple: you pay a reasonable premium, and if you need long term care in the future, the insurance company will either reimburse you or indemnify you to help cover your long term care costs.
With this type of insurance policy, you can proactively plan for future care. By paying affordable premiums today, you can protect your loved ones and yourself from the financial burden of your long term care in the future.
Different Types of Long Term Care Insurance Policies
The LTC insurance marketplace has been consolidating in recent years. At one time there were many companies offering LTC insurance. However, there are now just a handful of the best long term care insurance companies left.
But before you begin shopping for insurance providers for your long term care needs, you should understand what types of policies are available.
The traditional long term care insurance policy is a stand-alone policy that only covers long term care. With a stand-alone plan, there is no death benefit. However, these types of policies are the most flexible, allowing you to tailor your policy to fit your specific care needs and budget.
Like other types of insurance policies, LTC plans can be bundled with other types of insurance. Along those lines, one option at your disposal is long term care life insurance that offers both a life insurance death benefit and long term care benefit.
Hybrid policies are great for someone who is concerned about the “use it or lose it” aspect of stand-alone LTC policies. With hybrid LTC policies, you either (1) die and your beneficiary receives a lump sum death benefit; (2) suffer a chronic condition and you receive LTC benefits; or (3) receive return of premium benefits.
And it is not simply either/or. You may receive some LTC benefits but have more coverage left when you die. In that case, your beneficiary will receive the remaining death benefit.
Another low-cost option for long term care is to get an indexed universal life policy with a chronic care rider. The chronic care rider will pay out if you are diagnosed with a permanent chronic illness or cognitive disorder.
The chronic illness benefit is not considered long term care insurance. Rather, it is considered an accelerated death benefit, one which comes out of your life insurance death benefit.
More on Long Term Care Insurance Policies
Stand-alone LTC insurance policies are not going to provide the same benefits of life insurance. However, they are often less expensive than LTC+LIFE hybrid policies.
Hybrid long term care life insurance policies are typically either dividend-paying whole life insurance or indexed universal life. There are different options available based on which company you choose.
You can find single pay life insurance, 10 pay, or 20 limited pay life insurance, and policies which you pay for life.
Long term care is expensive and its costs are rising with every passing year.
With a flexible long term care insurance policy, you can affordably fund your future care needs. Getting started is as simple as assessing your needs and options and shopping for insurance quotes.
While the cost of long-term skilled nursing care is substantial, it doesn’t have to break the bank or be a burden to your loved ones thanks to affordable long term care insurance.