Why You Need Long-Term Care Insurance

The cost of long-term care insurance may not be cheap, but the cost of long-term care is extremely expensive, and is only moving higher.

Long-term care insurance is costly, but health care costs for seniors who need long-term care could easily undo decades of retirement planning. Here’s what you need to know about the costs and benefits of long-term care insurance.

The Chicago Tribune’s recent article, “Thinking of buying long-term care insurance? Consider these costs,” reports that a 2015 cost of care survey from insurance company Genworth Financial estimated the national median cost of care for a home health aide to be almost $46,000 annually, while the national median cost for a private nursing room home is more than $91,000 annually.

Because of high costs, some people are considering long-term care insurance to pay for these bills. However, if you’re considering purchasing this insurance,  it is costly, very complex, and not everyone will qualify.

It is money well spent to talk to an elder law attorney to see if these policies make financial sense. They can review a person’s assets and any other coverage they may have from Medicare, Medicaid and other state and federal programs designed to support the sick and elderly.

For those who don’t have many assets, an LTD policy may be too costly. These policies are less expensive for younger and healthier people. Policies are designed so the buyers purchase a set amount of benefits for a certain time period.

The premiums can go up dramatically as people age.  This is why someone purchasing a policy in their 40s, will spend less than someone in their 50s or 60s. With rising premiums, buyers must consider if they’ll have future assets to cover premium increases. Some policies have optional non-forfeiture riders that will protect what was already paid, if a policyholder can no longer afford the premiums.

LTD policies require medical underwriting, and having pre-existing illnesses will increase the cost.  There are also many situations where a person won’t be eligible for coverage, including cognitive impairments such as dementia, Parkinson’s and Alzheimer’s.

Once the funds are exhausted, the long-term care policy ends. How long it lasts will depend on the cost of care in your area and the level of care needed. Once the policy ends, usually after three or four years, other assets will be needed to pay for care. In many instances, you are deemed eligible for benefits (usually after a waiting period) when you need assistance with two or more activities of daily living such as getting dressed or bathing. Each policy is different, so you’ll want to review them with an estate planning or elder care attorney.

Reference: Chicago Tribune (November 6, 2017) “Thinking of buying long-term care insurance? Consider these costs”

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