Considerations for Long-term Care Insurance

Considerations for Long-term Care Insurance

Long-term care costs are expensive. You might not know exactly what kind of care you’ll eventually need, but you can get a sense of how much it would cost. One of the resources I look at to estimate costs is the Genworth Cost of Care Survey. Genworth Financial is an insurance company that provides long-term care insurance, and they conduct this useful survey.

The 2018 survey indicates the follows national median costs for health care:

  • a private room in a nursing home is $100,375 a year
  • staying at an assisted living facility is $48,000 a year
  • home health aides (44 hours a week) is $50,336 a year

These are national median costs, which may be more or less depending on where you live. Since you might need care at some point, it is an important part of your retirement planning strategy to consider how you’d be able to pay for these expenses. If you are wealthy you could self-insure and pay for costs directly from your own investment accounts or other assets. For people that have very limited resources and meet the exceedingly low asset levels to qualify, they may need to rely on Medicaid to pay for long-term care costs. For everybody else in the middle, you have to consider your options.

One possible solution is to obtain long-term care insurance. The insurance is expensive and may run a few thousand or several thousand dollars per year in premiums. The actual cost depends on a number of factors including your age, health, gender, where you live, the waiting period you select and how much coverage you get. You’ll need to review your budget and determine if you can afford the premiums. Remember, Medicare doesn’t cover long-term care costs. It will cover some skilled nursing but only for a short period of time. Similarly, your current healthcare insurance is unlikely to cover long-term healthcare.

But, before racing to buy a policy, do some research about the long-term care costs in your area or where you’ll want to live in your later years. Think about the lifestyle you want if you are disabled and need assisted living. Do you want to live at home for as long as you can, use the help of a friend or relative to care for you, or go into some form of residential housing? Knowing what is out there and what it costs is a good first step to understanding how much coverage you may need. Compare that answer to the assets you anticipate having and determine whether you need any additional insurance coverage. offers a premium calculator so you can get an estimate, and you may also want to consider talking to a long-term care insurance specialist who can look at premium to value across a number of providers using your specific information.

The younger you are, the lower the premiums, but you may be paying premiums long before you actually need it. If you wait to purchase this insurance in your early 60’s, that might be a good idea as long as you haven’t already had health issues which may prevent you from qualifying for the insurance. There’s a balance you need to find so you don’t buy the insurance too soon or try to get it when it’s too late. To help determine when to purchase the insurance, think about your health and your family’s health history. Does your family have a history of strokes, Alzheimer’s or other genetic conditions you could inherit that might impact your activities of daily living? In order for your long-term health insurance to kick in, you would need help to perform at least two activities of daily living, including eating, bathing, dressing, transferring (for example getting in and out a bed or chair), toileting and continence.

One thing that long-term care insurance could provide is the peace of mind that you’ll have either some or most of your long-term care costs covered. You might consider a policy for couples to avoid the risk of depleting all assets if one spouse needs long-term care and the other spouse is healthy and still needs funds for the rest of his or her retirement years. A hybrid policy combines long-term care insurance with permanent life insurance. The hybrid policy allows funds to be withdrawn to pay for long-term care expenses, and heirs can get the death benefit if the long-term care benefits of the policy weren’t fully used or needed.

Certainly, nobody wants to get sick or be incapacitated in any way. But if you, your spouse or your parents needed access to this type of care, you’d sure be glad that you planned for it in advance. Like most insurance, this is definitely one that you be better off living a long life and never having to use, but it’s there if you do. Whether you want to get long-term care insurance, use a hybrid policy, self-insure or use any other method to pay for long-term care, it’s always a good idea to consider how you’ll pay for your long-term care within your retirement plan.

For the Genworth 2018 Cost of Care Survey, click here:

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Cynthia Flannigan
Cynthia Flannigan

Cynthia made the shift to financial planning to guide clients through making good financial decisions through both grim and exciting changes in life. More than anything, she thrives on helping people. She obtained her CFP designation in 2008 and completed a masters in financial planning and taxation at Golden Gate University.

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