Who Needs Long-Term Care Insurance?

Who Needs Long-Term Care Insurance?Who Needs Long-Term Care Insurance?

Key Takeaways

  • Long-term care insurance helps protect retirement savings from being depleted by the high costs of nursing homes, assisted living, and home care.
  • Without sufficient savings or insurance coverage, family members may bear the financial burden of providing long-term care.
  • Medicaid has limitations and restrictions on the types of care it covers, potentially limiting options for care facilities.
  • Long-term care insurance offers more choices for care, including assisted living and home care, and can pay higher rates than Medicaid.
  • When considering long-term care insurance, factors such as age at purchase, daily payment limits, coverage length, and inflation protection influence policy costs and coverage.

As you get older, you may want to start planning for when you might need help with daily functions of living in your later years. Long-term care can be expensive, and it's not generally covered by Medicare.1

This is why many people consider purchasing long-term care insurance. Here are the considerations to take into account.

How Is the Cost of Long-Term Care Covered?

Long-term care describes the services that enable people to live as independently as they can when they're not able to care for themselves or participate in ordinary activities. This care includes nursing homes and assisted living, as well as home care provided with assistance.

In general, health insurance doesn't cover long-term care. In some instances, Medigap policies — which are intended to cover areas that Medicare doesn't — may cover copayments and deductibles for the limited care that Medicare does cover. But typically, they are not intended to pay for long-term care.

Some long-term care expenses in the U.S. are covered by Medicaid, but that program is for indigent people only and you must meet your state's eligibility requirements to qualify for coverage.2 Depending on the rules of a particular state, Medicaid may not cover home care or assisted living.

Other options for funding long-term care include income and savings, annuities, and private, long-term care insurance.

Do I Need Long-Term Care Insurance?

Long-term care insurance policies can be written to cover a variety of scenarios, such as nursing home-only coverage or policies that provide a range of care, from at-home care to care provided in a skilled nursing facility. These products usually pay policy holders a per-day amount up to a limit set in the policy.

There are a couple reasons you may want to consider long-term care insurance:

To Help Protect Retirement Savings

Even if you have a healthy nest egg, the cost of long-term care can quickly consume all or most of the money you have saved for your retirement.

According to SeniorLiving.org, these are the national average costs for long-term care:3

  • $7,756 a month or more than $93,075 a year for a semi-private room in a nursing home.
  • $8,821 a month or more than $105,850 a year for a private room in a nursing home.
  • $150 per day for a home health aide.
  • $147 per day for a homemaker service.

It's important to remember that most private health insurance policies have the same general rules as Medicare regarding long-term care. Coverage is limited to 100 days for medically necessary care after hospitalization.

To Not Financially Burden Others

If you don't have enough savings, your family members may try to help. This can add to your level of worry if your loved ones also have little savings.

However, family members can be burdened in other ways. In addition to financial assistance, the majority of older people who receive home health care rely on family to help with things such as bathing, dressing, eating, grocery shopping and meal preparation. You may not want to impose this requirement on your loved ones, so ample consideration is needed.

Considerations Around Preserving Your Choices

Once your savings are depleted, you may be eligible for Medicaid coverage for nursing home care. But Medicaid has restrictions on what kinds of care it will cover, and nursing homes may limit the number of Medicaid patients they accept. Medicaid may also restrict whether it will pay for home-based care or assisted living.

Long-term care insurance policies can be written to cover a range of care options and to pay higher rates for care than Medicaid. This, in turn, increases your options in long-term care facilities, including assisted living and home care.

How You Can Get Long-Term Care Insurance

Long-term care insurance policies were likely purchased through an insurance agent, a financial planner or a broker. If you're interested in purchasing long-term care insurance, you can reach out to one of these professionals for assistance.

Together, you can discuss your preferences regarding your level of coverage, which can also help to determine the costs of your policy. But that's not all the information you'll be asked to supply. The policy cost will also be based on:

  • Your age when you purchase your policy.
  • The maximum daily payments the policy will make toward your care.
  • The maximum length of care the policy will cover.
  • Other options, such as whether the policy benefits will increase with inflation.

If you decide to move forward in purchasing long-term insurance, a financial representative can help you find the best available options for your needs. Don't hesitate to reach out today if you're interested in planning for tomorrow.

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  1. Long-term care. https://www.medicare.gov/coverage/long-term-care.
  2. Answers to All of Your Questions About Medicaid Long Term Care. https://www.medicaidplanningassistance.org/medicaid-long-term-care-faq/.
  3. Nursing Home Costs in 2023. https://www.seniorliving.org/nursing-homes/costs/.

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