Planning for the future can bring you and your loved ones incredible peace of mind. With 70% of Americans requiring some amount of long-term care in their lifetime, knowing how you’ll pay for that support can take away a lot of pressure, plus help reduce caregiver fatigue. One way to cover a lot of the cost of long-term care, including assisted living, is purchasing insurance coverage.
What is Long-Term Care Insurance?
Long-term care insurance provides coverage when a person becomes unable to care for themself and needs help with daily tasks like bathing, eating, or dressing. This can be a temporary change, such as during recovery from an injury or operation, or longer-term due to changes in physical or cognitive health.
This type of insurance typically covers a portion of the cost of long-term care in an assisted living facility or nursing home, as well as certain home care services.
What Types of Long-Term Care Insurance Exist?
There are two main types of insurance available for long-term care coverage. First, there’s a traditional long-term care insurance policy. This is a standalone policy that specifically covers a situation where an individual needs more help with daily activities.
It’s less common today than the second option, life insurance with a long-term care policy. Also referred to as hybrid policies or linked-benefit policies, this life insurance add-on may also include the option to disburse money to your heirs in the event that you don’t end up using long-term care.
When Should I Consider Long-Term Care Insurance?
The costs for long-term care insurance rise sharply as the years pass, so it’s a good idea to start looking into it in your 50s, if possible. Premiums will rise due to age and illness. Couples can often receive better rates, and with premiums generally being considerably higher for women than men, a married woman may be able to get a better couple rate while her spouse is healthy and living.
How Much Does Long-Term Care Cost?
According to the AARP, Americans who need long-term care will spend an average total of $140,000 out of pocket—but on the other hand, about 48% will only need care for less than a year. And, of course, some people will never need it.
There are a lot of variables to consider when trying to estimate the cost of long-term care, from the level of care required, to inflation, and where you want to live. But by simply planning for it, you’re taking an important early step.
According to a survey from Genworth, the average annual cost of assisted living across the U.S. in 2020 was $51,600—though it varies widely between states. In Massachusetts, the annual average cost for assisted living was $73,020 in 2020. You’re welcome to contact us directly to learn more about our rates.
Long-Term Care Insurance Can be Expensive
Only about 7.2 million Americans have long-term care insurance, meaning the majority of the 94.5 million Americans over 55 will need another way to cover the cost of any additional care they may require over the years.
The cost of long-term care insurance can be considerable, and even out of reach for some Americans. As with other types of insurance, the cost will range depending on the health, sex, and age of the individual seeking coverage, where they live, the level of coverage they’re seeking, and options like inflation protection.
It’s important to shop around for insurance coverage. Consider working with a trusted broker and compare several policies. You may have an option to buy a policy through work benefits, and those benefits may apply to your parents, grandparents, spouse, or even your siblings.
What Does Long-Term Care Insurance Cost?
In its 2021 price index survey, the American Association for Long-Term Care Insurance provides lots of examples of annual rates. For example, a 55-year-old male with an initial policy benefit worth $165,000 might pay an annual rate of $950, while a 55-year-old female with the same policy would pay $1,500. If the two of them were a couple, they could see a combined annual rate of $2,080.
What if those same people wait 10 years to buy comparable coverage? The man would pay $1,700 a year, the woman $2,700, and as a couple they would pay $3,750. That’s assuming they’re still approved for coverage.
Keep in mind, that’s just one example. In 2007, the average annual cost of this type of insurance for an individual was $2,207, according to LongTermCare.gov, with a daily benefit amount of $160 and 4.8 years of benefits.
Why Do Women Have to Pay More for Long-Term Care Insurance?
Women’s premiums are typically higher for a number of reasons, including because they tend to live longer than men, have higher rates of chronic illness, and make up the majority of people living with Alzheimer’s.
Long-Term Care Insurance Can Provide Peace of Mind
Knowing how you or a loved one will be cared for if additional care is ever needed—in the short- or long-term—might be priceless to you and your family.
You May Not Qualify for Long-Term Care Insurance
Different insurance providers have different coverage standards that may disqualify candidates, which is part of the reason that it makes sense to consider this type of insurance earlier in life. Some reasons for denying coverage can include:
- An Alzheimer’s disease diagnosis
- Metastatic cancer
- Progressive neurological conditions such as multiple sclerosis or Parkinson’s disease
- A history of strokes
- Being in palliative care
You May Never Need Long-Term Care
Some people may never need the additional care that’s covered through long-term care insurance. If they do have that coverage, their loved ones might feel as if they’ve spent considerable money on an unused service, but that’s the reality of insurance.
A hybrid policy that’s part of broader life insurance coverage can pay out some money to a person’s heirs if they don’t end up using long-term care, which can be a good balance for some people.
Long-Term Care Insurance May Not Provide Long Enough Coverage
Experts generally recommend a policy that covers three to five years of long-term care, but about 20% of Americans will need more than five years’ care. There’s no way to know for sure how much care an individual will need, but women on average use about 3.7 years of care while men use 2.2 years.
What are the Alternatives to Long-Term Care Insurance?
If a long-term care policy doesn’t sound like the right approach for you or your loved one, there are still options available that can help you plan for this cost.
Family & Friends
The support of family and friends is invaluable, and can be a good fit when an individual needs help with things like transportation to appointments and getting groceries. However, when more assistance is needed, it can start to take a toll on loved ones and cause stress on the relationship.
Out of Pocket
Sixty-three percent of caregivers use their own retirement and savings funds to pay for care. This may initially be for support like meal delivery services or in-home care, but then later grow to include assisted living or nursing home care.
A homeowner who is 62 years or older can use a reverse mortgage to get a tax-free loan that can be used for anything, including care, though they’ll need to pay off any other debt against the home first.
For those low-income individuals and couples who qualify, Medicaid can cover certain medical costs and long-term care support.
While Medicare does not cover ongoing long-term care like assisted living, it can cover some of the costs of a temporary nursing home stay following a hospital stay.
Should I Buy Long-Term Care Insurance?
As you can see, there are lots of variables to consider when it comes to long-term care insurance. The answer is really “it depends”—on your needs, your finances, and what support you have in place right now. We’re available to help you decide if long-term care insurance or another approach might be right for you or your loved one.