Long Term Care

There are Four Reasons Why People Avoid Long Term Care Planning

photo of couple making decisions

Reason 1: The Cost - More than 50% of those over age 50 worry about the cost of long-term care. As many as 84% believe they won't be able to afford it.

Reason 2: Wishful thinking - A majority of those surveyed simply assume they won't need long-term care assistance and some even base their decision on the ill advice of friends and family.

Reason 3: It Won't Matter and I will lose everything anyway - Based on inflation rates, nursing home costs could more than double by 2030 and how could I afford that? But people are unaware that Long Term Care benefits can increase annually to keep up with medical inflation.

Reason 4: Quality of life - 81% of Americans over age 50 would rather live 5 years at home than spend 10 years in a nursing facility and don't realize the benefits of Long Term Care can cover them at home too.

Do I Need to Purchase Long Term Insurance?

The question of whether to buy Long Term Care Insurance confuses most consumers. To determine if a Long Term Care policy makes sense for you, it is important to understand how the coverage works and why you need it.

Long Term Care Insurance can be an effective tool for protecting your assets and estate from the high costs of senior health care and living a long life.

But that begs the question: What is Long Term Care? Long Term Care is defined as the services we need when we're no longer able to care for ourselves due to chronic conditions or mental impairment.

As we age, most us will need some form of help with the basic tasks associated with daily living. The Six Activities of Daily Living or (ADLs) are:

  1. Bathing
  2. Eating
  3. Dressing
  4. Continence
  5. Toileting
  6. Transferring

Services provided under long-term care insurance include housekeeping, shopping for essentials, cooking, bathing, helping with other chores.

Home Care Services such as physical therapy, skilled and unskilled nursing care and Home Health Aides provided by licensed agencies are generally covered as are skilled, intermediate and custodial care services provided in licensed nursing facilities.

It should be noted that if any conditions are pre-existing, benefits are often denied if care is needed within six months of the policy's issue date for that condition.

What are the costs?

Photo of piggy bank with money
  • The costs for care in a home ranges from $46,000 to $120,000 per year
  • The costs of $46,000 per year are for MediCal facilities which may not be where you want to be when you need care
  • The rate of inflation in the Long Term Care sector is increasing by about 5% per year which means these costs will double in 14.2 years
  • The Milliman Actuarial Survey found that the average Long Term Care claims typically lasts 4 to 5 years and also indicated that on average the first event of care occurs at Age 81 and lasts for 4 to 5 years

Are you thinking, "It cannot happen to me?" Statistics show that it not only can happen, but it is very likely to happen. And to make matters worse, the costs for Long Term Care Insurance are going up the older you become.

Moreover, Insurers miscalculated the fact that people are using more benefits, living longer lives and initially underpriced their insurance programs which is why costs for new policies have risen about 50% in the past three years.

In addition, rock bottom interest rates exacerbate the problem since insurers rely on bond income to pay claims.

Will I Use my Long Term Care Insurance?

Retirement Ahead Sign

The odds of you using your Long Term Care Insurance are higher than other risks you insure against, for example:

  • Odds of a home fire are 1 in 1200
  • Odds of having automobile damage are 1 in 25
  • Odds of needing your medical insurance are 1 in 15
  • While the odds of needing Long Term Care are better than 2 in 5!

Long Term Care is usually not covered by your personal health insurance plan or by the policy you may currently have from an employer for more than 100 days.

  • Medicare, the primary health care program for retirees, pays only for skilled or rehabilitative care, not custodial care in any venue.
  • Medicaid, a federal and state program for financially needy individuals, will pay for custodial care, but primarily in nursing homes. Funding for home care and assisted living is very limited.

With Long Term Care insurance you can plan and budget for a known premium for a policy that will protect you from potentially large out of pocket expenses eroding your life's savings.

Every study conducted finds that in the beginning, care is overwhelmingly provided at home. The key question, of course, is who is going to pay for it?

Payment for care is not just in financial terms but also the effect on families emotionally and physically. It will be very expensive and the cost for care today is not your problem. Rather, it is the inflated cost sometime in the future - 20 or 30 years from now that you must plan ahead to provide for during retirement.

The result is that consumers are forced to pay privately for their care - potentially devastating their assets.

Unfortunately the best thought out retirement plan rarely takes into consideration living a long life - with what could be twenty to thirty years or more in retirement.

Put another way, those assets and income have already been allocated to pay for retirement, not for the consequences of living a long life and requiring continuing medical care. This results in the need to invade principal, divert income and tremendously reduce your retirement savings.

As a result, one of a seniors' greatest fears "that of outliving their assets" literally may come true unless they have guaranteed income in addition to their Social Security check.

Your Choices Are Crystal Clear

Pray - That you live a long and healthy life and that one night you go to sleep and the good Lord takes you out.

Family - Be very nice to your kids and hope they can take care of you.

Society - Medicaid/Welfare – is that what you really want?

Do-It-Yourself - How good a saver are you and will you have time?

Transfer The Risk to an insurance company and pay for your benefits at merely pennies on the dollar.