Buying Long-Term Care Insurance: 4 Things to Consider
A long-term care policy may or may not be right for you. Keep these issues in mind as you make your decision.
Planning for long-term care isn’t something most people like to think about. This is probably why many put off doing it. But that isn’t really advisable. Regardless of your situation, it’s better to start planning now rather than later.
One option is to take out a long-term care policy. If you’re like many people, you may not be familiar with this kind of insurance. Simply put, it’s a policy that covers the cost of caring for you when you can no longer care for yourself. Among other things, it can help you pay for:
- In-home custodial help
- In-home nursing assistance
- Assisted living
- Nursing home care
- Care in certain other facilities
You may be thinking you’re too young to worry about this right now, but that’s not necessarily so. There are several reasons why.
You can’t predict the future
Thanks to modern medicine, your chances of making it to old age are very good. You could even live into your nineties. If you do happen to be so lucky, you’ll probably need some level of help. According to one recent statistic, 70 percent of those 65 and over end up receiving some kind of long-term care.
And experts say women need more than twice the amount of long-term care insurance that men do. By one estimate, women make up nearly 75 percent of all nursing home residents.
Long-term care is expensive
What’s more, costs are expected to double over the next 20 years. Even in-home care can be expensive. Round-the-clock nursing, for instance, is said to be very costly. But careful estate planning in conjunction with a long-term care policy could help you cover those costs.
There are other ways to pay for custodial care, too. For instance, you might consider financing it with:
- A personal savings plan (PSP)
- 401(k), pension or other retirement plan
- Home equity or reverse mortgage loan
Health insurance is not for long-term care
That’s not its purpose. It might cover your prescriptions and the doctor visits, depending on the kind of policy you have. But it’s not intended for other kinds of expenses, such as room and board. The same is true for Medicare, which is only meant to cover your medical expenses.
Medicaid does cover long-term care, as long you’ve exhausted most of your assets already. You can transfer money and property to relatives beforehand, so long as you do so five years in advance.
Long-term care policies specify the benefits they cover. But long-term care is constantly evolving. When new forms of it come along, there may be some lag time before they are covered. This is why you need to be very careful with your end-of-life financial planning.
In truth, long-term care planning probably isn’t something you should do on your own. It’s simply too complex. You need help keeping up with new laws and figuring out how much to set aside. This is where a good estate planner or elder-law attorney can be helpful. For help finding one, contact your area Agency (or Council) on Aging. You can also try your state or local bar association, or ask your doctor to refer you.
Remember: the sooner you start planning and saving, the better off you’ll be down the road.