Discussing personal insurance matters can be sensitive, especially when addressing mortality, morbidity, or declining health. But long-term care insurance plays a crucial role in securing financial stability and providing peace of mind for individuals and their families as they age.
What is LTC Insurance and why is it important?
Long-term care (LTC) insurance is a type of insurance policy designed to help cover the costs associated with long-term care services and support for individuals who have difficulty performing basic activities of daily living (ADLs) due to chronic illness, disability, or cognitive impairment. As life expectancy continues to increase, the likelihood of needing long-term care services also rises. Long-term care encompasses a range of assistance and support services for people who cannot perform ADLs, such as bathing, dressing, toileting, transferring, and eating.
One of the key reasons why long-term care insurance is essential is the high cost of these services and the duration these services could be needed. Long-term care can be expensive, and without insurance coverage, defined as a “transference of risk,” the burden often falls on the individual or their family, depleting savings and assets rapidly, not to mention the emotional and physical tolls. With the average length of care lasting several years, the financial strain can be overwhelming. Long-term care insurance acts as a safety net, providing coverage for these expenses and preserving the financial well-being of the insured and their loved ones.
According to data from a 2021 report by Genworth, the median cost of care in the U.S. was approximately $59,488 (in-home) to $108,405 (facility) annually. These figures are conservative as they are a national average. For example, in Massachusetts, the average cost is now close to $13,000 per month for a higher-end facility.
There are several types of LTC Policies that could meet your needs
- Traditional LTC policies normally begin as the least expensive, but these are “use it or lose it” policies. Premiums have historically risen each year as we see longer life expectancies and higher usage rates.
- Hybrid policies are life insurance contracts with LTC benefits. This may provide more predictable premiums, and if LTC usage is low, a death benefit will be paid to heirs. (In other words, it’s not use it or lose it.)
- LTC Annuity policies are also available for people who may not be insurable. You pay an insurance company a single premium payment in exchange for covering LTC expenses. It is designed to prevent people from using their retirement savings to pay these costs.
Long-term care insurance offers individuals more choices and control over the type of care they receive. It allows policyholders to choose where and how they want to receive care, whether it’s in their own home, an assisted living facility, or a nursing home. Whether long-term care makes sense for you or not depends on various factors, including your current health, financial situation, and personal preferences.
Family Support: Long-term care insurance can help protect other family members from becoming caregivers themselves. Family caregivers often face emotional, physical, and financial strain while juggling their own responsibilities.
Financial Situation: Long-term care services can be expensive. Assess your financial resources, including savings, investments, insurance coverage, and any available government programs (e.g., Medicaid or Medicare), to determine if you can afford long-term care services.
Health Status: Evaluate your current health and potential future health needs. Do you have a chronic condition, disability, illness, or family history that may require ongoing care and assistance? Consider the likelihood of needing assistance with ADLs.
Personal Preferences: Do you want to protect your assets and ensure you have coverage in case you need services in the future? The cost of insurance premiums may be more manageable when purchased at younger ages. Don’t delay.
Does LTC make sense for you?
Ultimately, the decision about long-term care should be based on your individual circumstances and needs. Investing in long-term care insurance can be a prudent decision for individuals to safeguard their financial security, ensure access to quality care, and relieve the potential burden on their family.
It’s important to plan for the possibility of needing long-term care services as you age. Whether it is LTC or other insurance needs, it is essential to consult with an experienced professional to help you make informed decisions.
Our Insurance Manager Gregory P. Killilea will be happy to review long-term care policies with you and assist you.