What Everyone Ought to Know About Long Term Care Insurance

What Everyone Ought to Know About Long Term Care Insurance

You’ve seen the stats.  Long term care is expensive, and we’re all likely to need it at some point in our lives.  The cost of spending time in a nursing home or assisted living facility adds up quickly, which is why many retirees choose to insure against it through a long term care insurance policy.

Problem is, since there’s a high likelihood of requiring long term care, insurance is an expensive proposition in its own right.  Plus, there’s no guarantee that the premium costs of a policy today don’t rise in the future.  Genworth, one of the biggest underwriters in the long term care insurance, received approval in the Q1 of 2019 to raise premiums an average of 58%.  (Insurance companies must receive approval on a state to state basis).  That’s also after the company raised costs an average of 45% in 2018, and 28% in both 2017 and 2016.  Ouch.

Are you better off crossing your fingers and hoping you don’t need expensive care for a long period of time?  Or is it better to cover this risk through an insurance policy that will cost you an arm and a leg anyway?

This post will cover the essentials of long term care insurance, including exactly how to decide whether picking up a policy is a good decision for you and your family.

 

Long Term Care: The Stats

So here’s the big question.  What are the chances you’ll ever need long term care?  According to longtermcare.gov, about 70% of people turning 65 will need long term care services at some point in their lives.  With the average annual cost of a nursing home totaling around $100,000 these days (depending on where you live), this can be a scary proposition.

The stats can be misleading, though.  Many people who need long term care services only need them for short periods of time.  And since most long term care policies have elimination periods (the waiting period before the policy starts paying out) of around 90 days, many people won’t even need care long enough for their coverage to kick in.

What Everyone Ought to Know About Long Term Care Insurance

What Everyone Ought to Know About Long Term Care Insurance

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Pros & Cons of Long Term Care Insurance 3 Top Arguments For & Against

Pro’s & Con’s of Long Term Care Insurance: 3 Top Arguments For & Against

I have a good number of clients who are in their mid-50s, and hearing from friends and colleagues that they should consider obtaining long term care insurance.  They’ll often quote stats about the staggering percentage of us who will need long term care services at some point in our lives, or the mention the high cost of services.

These are valid points.  But there are equally valid reasons NOT to obtain a policy.  I’ve written on long term care insurance in the past, and how to determine whether you’re a good candidate for it.  Since this is a topic that comes up in my practice with some frequency, I thought I’d devote another post to the top arguments for and against long term care insurance.  If you’re reviewing your own situation and wondering whether to obtain coverage, you should consider these six points.

Let’s start with the top arguments FOR obtaining long term care insurance:

 

1) There’s a Good Chance You’ll Need Care at Some Point

Long term care services are described (in insurance policies) as requiring help in two of six “activities of daily living”.  The six activities are:

  • Eating
  • Bathing
  • Dressing
  • Getting on and off the toilet
  • Getting in and out of bed or a chair
  • Maintaining continence

Needing help with two of these six activities is a triggering event for long term care policies.  Policyholders in this situation can make claims on their policies.

The stats say that 68% of us will require long term care (needing help in two of the six areas) at some point in our lives.  This is a staggering number.  And with longevity rising around the world, I wouldn’t be surprised to see that number climb over the next 20-30 years.

While not everyone will need help for a long period of time (many will only need some assistance for a couple weeks, maybe after recovering from surgery) chances are pretty good you’ll need a hand at some point.  Rather than relying on family or friends, long term care policies can pay for professional help in your home or a stay in a facility.

 

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