Long term care is not a popular topic around the dinner table. But according to the U.S. Department of Health and Human Services, at least 70% of those people age 65 or older will need some form of long term care. Although long term care insurance is complicated and can be expensive, it can also be of significant importance as you plan your retirement.
What is Long Term Care?
Long-term care can be composed of many different types of services related to the support of your health and personal care. Long term care includes tasks, frequently referred to as Activities of Daily Living, such as:
- Getting Dressed
- Using a Restroom
Will Your Other Insurance Cover You for Long Term Care Expenses?
Neither your health insurance nor Medicare will cover very much in the way of long term care costs. Medicaid will pay for long term care costs, but there’s a hitch: you have to be nearly broke before Medicaid pitches in. With some minor state-by-state differences, you can typically have only up to $2,000 of liquid assets in your name before Medicaid assists. Therefore, the lion’s share of the costs of long term care must be paid privately.
What Can Long Term Care Insurance Do For You?
Numerous long term care insurance policies exist subject to various waiting periods, per-day caps, deductibles, and other restrictions. Nonetheless, many long term care insurance plans can help defray the costs of:
- Helping you with your activities of daily living
- Nursing home care
- Care in your home
Who Should Buy a Long Term Care Policy?
Costs for long term care insurance can be burdensome, particularly for those policies which are bought late in life. Many advisors feel that the middle class is better positioned to take advantage of long term care insurance than either the poor or wealthy. Less affluent people, the thinking goes, can forgo the expense of long term care insurance since they would have relatively less money to lose before Medicaid would take over. Extremely well-to-do people can effectively self-insure and avoid years of premium payments. By doing so, however, they risk the chance they will incur expensive out-of-pocket expenses if they wind up needing long term care.
Buying a Long Term Care Insurance PolicyWhen considering purchasing a long term care policy, timing is critical. By waiting into your late sixties or beyond to purchase a policy, you face two increasing challenges. First, the premium cost may become too high for you to afford. Second, you might be declined due to your increased health risk. As a result, many advisors feel that purchasing a policy before retirement is appropriate.
What Should You Do About Long Term Care?
Although long term care insurance isn’t for everyone, it’s possible nearly anyone could benefit from having it. Furthermore, the relative youth of the long term care insurance industry combined with high costs and complexity cause many people to choose to opt-out of a healthy analysis. Far better is to learn more by researching what policies are available to you and at what costs. Ask many questions to find out what combination of waiting period, types of care available, out of pocket maximums, and other options might lead you to an appropriate policy.