Is Long-Term Care Insurance Worth It? Ep #98

If you’ve reached your 50’s, you’ve likely wondered, is long term care insurance worth it?

Long-term care insurance comes with so many questions and opinions. The decision is complex as it’s highly customized due to individual circumstances of saving, spending and health histories.

We’ve seen and evaluated many of these different scenarios. So if long-term care insurance has been on your mind, join us, as we discuss the most asked questions surrounding this type of insurance to help you decide if it’s worth it for you.

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Why do people consider long-term care insurance?

There are 3 different ways that people may fund their long-term care needs.

  1. Self-insure, or use their savings.
  2. Transfer Risk, by purchasing long-term care insurance.
  3. Rely on government funding, combination of Medicaid or Medicare.

If you are in the sandwich generation, where you are on the tail-end of helping your kids and helping your parents at the same time, you can identify with the following scenario. As you watch your parents age, you begin to see the emotional and financial stress that can arise. In turn, you begin to question how long-term care insurance could benefit you in a similar situation.

Additionally, the stats can be scary. Seventy percent of people will need some sort of long-term care. Usually, a stay in long-term care is only a couple of years but, 1 in 10 men will require a stay of more than 5 years and 2 out of 10 women will stay more than 5 years in long-term care.

At what age should you buy long-term care insurance?

Long-term care insurance premiums get more expensive as you age. According to the AALTCI, if you decide to purchase an LTC policy, the best time is in your mid-50s. Costs tend to jump about 6-8% each year that you wait. But even if you do buy early, the premiums could still increase. It’s taken time for actuaries to fully understand the risk and lapse potential for these policies. This has resulted in large premium increases. In some cases as high as 20% every five years on current policyholders. Just another factor to consider when evaluating the tough decisions you could face in owning an LTC policy.

What does long-term care insurance cover?

Generally speaking, people need long-term medical care when they can no longer perform the activities of daily living or ADL’s. This includes going to the bathroom alone, eating, moving about the home, or they experience a decline in mental state.

As for how the LTC insurance benefit could pay out, there are 4 variables to consider when evaluating coverage options:

  • How long before policy will begin paying, known as the elimination period.
  • The maximum period the long-term care insurance will cover, typically 6 years or less.
  • The daily benefit amount you’ll need, typically $100-$200 per day.
  • Do you want benefit payouts to increase over time, known as the inflation rider.

Your premiums will then be calculated by the variables that you choose.

So, how much does it all cost?

Long-term medical care is not cheap. A private room with skilled nursing can cost around $100K per year in most states. Going down the care scale, assisted living averages about $75K per year. And home health can be about $50K per year, but you do have to factor in household expenses as well. You can see the costs in your state below in the Genworth Cost of Care Survey.

For example, an average healthy 65-year-old couple could purchase a long-term care insurance policy for $4,800 per year with benefits totaling $180K. If that same couple waits until 75 to purchase a policy that premium amount could increase to $8,700 a year. We did say a healthy couple. You’ll also need to consider the fact that not everyone gets approved. The longer you wait to buy a policy, the harder it may be to get approved.

Additionally, if you have no heirs to assist you in an LTC event, this should factor in to your decision. What type of care will you desire, if you can not make decisions for yourself?

It’s important to have as much information as possible when deciding if long-term care insurance is worth it. Understanding all of the factors before you commit. We’re here to help you make informed choices. Listen in to hear all of the factors that you should examine when considering whether to buy long-term care insurance.

Outline of This Episode

  • [4:27] Why do people consider long-term care insurance?
  • [6:57] At what age should you buy long-term care insurance?
  • [10:14] Won’t Medicare cover this?
  • [10:50] What am I paying for?
  • [13:47] How much does it cost?
  • [16:46] A case study about self-insuring
  • [20:07] What types of policies are there?
  • [23:25] What questions should you be asking yourself?

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