None of us has a crystal ball or the ability to see into the future to predict whether or not we’ll need long-term care insurance. And while we all hope that we will live a long, healthy life in which we care for ourselves and live independently, the reality is that this hope is just that—a hope.
While we can’t predict what’s ahead for us, we can look at the statistics. According to the U.S. Department of Health and Human Services, 70 percent of people turning 65 can expect to require some form of long-term care during their lifetime. That care might mean getting assistance in your own home or staying in a nursing home. With the average life expectancy just over the age of 72, the length of those care needs can range from a few days to a much worst-case scenario that requires months of intensive care.
Long-term care insurance is an option to cover care that may not be available by health insurance, Medicare, or Medicaid. Costs for long-term care are more than you might even imagine. According to a recent New York Life Insurance Company Cost of Care Survey:
- The average cost of a year’s care in a private Medicare-certified long-term nursing home room is $104,000.
- The average in-home care costs $49,920 a year for 40 hours of help per week.
- A year in a 1-bedroom assisted living care facility averages $57,000 per year.
While many people believe government programs such as Medicare and Medicaid will pay for all of their future long-term care needs, in reality, government aid may only pay for some of these services, and they tend to have many restrictions.
- Medicare: May cover a maximum of 100 days of services after a hospital stay. Coverage is designed to assist people during a short-term recovery and doesn’t include personal care or supervision services
- Medicaid: If you have limited assets and income and are relying on Medicaid, the state may make key care decisions on your behalf, including where you receive the care you need.
While many assume long-term care insurance is something to be used for a diagnosed illness later in life, it actually covers care even if you are at home and can’t perform daily tasks, such as getting dressed, bathing, or preparing simple meals.
Long-term care insurance differs from life insurance. Life insurance pays the beneficiary a fixed amount when the life insurance holder passes away. This type of insurance can provide financial protection to help make your family’s future more secure, or it could be used to help cover your final expenses. It does not cover the expenses of your care while you are living.
When is the right time to look into long-term care insurance? The answer, say the experts, is sooner rather than later. If you’re a 50-plus, now’s the time to explore your options for this insurance.
“People tend to be in denial, but the insurance is likely to be affordable in your 50s,” says Kevin Johnson, founder, and CEO of NY Long-term Care Brokers and Advisors Insurance Brokers in Clifton Park. “By age 60-70, you may have medical issues that could cause you to be declined.”
The cost of long-term care insurance varies greatly, but traditional policies average about $2,100 annually for a 55-year-old couple and $3,700 for a 65-year-old couple, according to the AARP. If you’re in good health around age 50, monthly premiums could be as low as $200 per month, depending on the plan you choose “We custom-make plans for people that fit into their budget,” Johnson says.
One important caveat: if you don’t require long-term care, the insurance will not transfer to your beneficiaries. It is use it or lose it.
“Taking out long-term care insurance can be like a roll of a dice,” says Bill Canty, owner of Canty Financial Management in Ballston Spa. “I’ve seen people who didn’t have it go through all their money, but if you have a sudden, quick illness and don’t need it, it’s gone.”
Experts advise shopping around for long-term insurance brokers. Make sure you clearly understand what’s covered—and what’s not—before you sign up.