Should I Get Long-Term Care Insurance?

One of the most challenging aspects of planning for retirement is the unknown of long-term care expenses. These expenses include assistance for day to day needs, like eating, dressing, bathing, and using the toilet. According to the U.S. Department of Health and Human Services Administration on Aging. help like this will be needed, at least for some period of time, by most people over 65.

A common misconception is that Medicare will pay for long-term care. In certain situations, Medicare may pay for rehabilitative care, but for no more than 100 days. It will not pay for what is known as custodial care. Custodial care clients are known as private pay, meaning they will have to pay with their existing assets.

Insurer Genworth, in their 2018 cost of care study, forecasted that a a third of Americans will spend time in nursing homes. How long, of course, varies (the average is around three years), but the median annual cost of this care is about $100,000 for a private room. Another common alternative is home health care with a median annual cost of approximately $50,000. Given these costs, a large portion of the population will rely on unpaid family care.

Another alternative is to purchase a long-term care insurance policy. The average annual premium for a 55-year-old is around $3,000 in 2019, according to the American Association for Long-Term Care Insurance. In addition, several life insurance companies have developed riders that have long-term care benefits.

Many clients are leery of paying for the cost of long-term care insurance that they may never use. And yet, most will readily pay auto and home insurance premiums with the hopes of never needing to collect.

How to deal with future long-term care expenses is one of the most difficult issues facing financial planning clients. Some believe it is worth the cost to gain the peace of mind to know that at least some of their assets are protected. Others are simply willing to “roll the dice”. What is important is to have the discussion, understand the various alternatives, and to plan accordingly.