Should I Purchase Long-Term Care Insurance?
As our population ages, the cost of long-term care continues to increase as well. Many people worry that their savings and assets will not be enough to cover the cost of care should they require long-term care in the future. Long-term care insurance can be one way to plan to pay for these costs, but it is not for everyone. So how do you know whether purchasing long-term care insurance is right for you?
What is “long-term care?”
Long-term care can mean a variety of things, but typically it refers to specialized care that people receive when they need assistance with their activities of daily living. “Activities of daily living” include bathing, feeding, transferring, toileting, incontinence, dressing. This type of assistance can be offered in the home, in an assisted living community, or in a nursing home. In-home care could range from simple tasks, such as a companion to sit with you, or round-the-clock skilled nursing care offered inside of your home. On the other hand, residents who live in assisted living facilities usually require assistance with one to two activities of daily living, while nursing homes offer assistance with all activities of daily living.
What is the cost of long-term care?
Long-term care costs vary greatly depending on the type of care received and the geographic location of the caregivers. In Eastern Virginia, for example, 24/7 skilled care in the home can cost over $8,000 per month. Assisted living care usually costs $3,000 to $4,000 per month, and nursing home care can cost anywhere from $6,000 per month and up, depending on the services received.
How do people pay for long-term care?
Obviously, long-term care is expensive and most people cannot afford to pay for the average three- to five-year nursing home stay out of their own pockets (although some can). However, there are other ways to cover the cost of long-term care:
Medicaid: If you have limited resources, Medicaid will help cover the cost of nursing home care. However, there are very strict eligibility rules for Medicaid, and applicants are only able to keep $2,000 in countable assets in order to qualify.
Veterans’ Benefits: If you are the veteran or spouse of a veteran, you may be eligible for a pension to help supplement the cost of long-term care. However, the maximum benefit is usually around $2,200 per month, and therefore this pension will not fully cover the cost of long-term care.
Medicare: Medicare only covers short-term nursing home stays after an illness or injury that requires hospitalization – and even then, it only covers up to 100 days of skilled care.
Long-term care insurance: Long-term care insurance allows you to pay a monthly or annual premium to purchase a policy that pays all or some of your long-term care costs if you require the care. For example, you may have a policy that covers $150 per day of care for a maximum period of three years. While this will not cover the entire cost of your care, it can certainly supplement the cost of your care
Should I purchase long-term care insurance?
There are many types of long-term care insurance to consider. There are “traditional” policies, in which you pay a regular premium in exchange for the promise that a portion of your care will be covered should you need it. However, this “use it or lose it” option can be unattractive since there is no guarantee that you will need the care. For that reason, many companies have begun to offer “hybrid” policies that offer long-term care insurance but also include a life insurance component as well. There are also policies that allow you to reinvest your current assets into a long-term care insurance policy. These policies are often attractive to people who may have difficulty when going through the health screening that the other types of long-term care insurance policies require.
While it can be an attractive option, purchasing long-term care insurance might not be right for everyone. In recent years, as the population has begun to age, more and more people have been cashing in on their long-term care insurance policies. As a result, many companies have raised premiums significantly – and some companies have stopped offering long-term care insurance altogether. For that reason, it is important to meet with a professional who will be able to help you explore all of the long-term care insurance options available to you.
What to do next
If you are curious as to whether you are eligible for long-term care insurance or even if you wonder what your other options are to pay for long-term care, you should consult with an elder law attorney to discuss your options. It is never too early – or too late – to start planning, but the earlier you start, the more options will be available to you.
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