Preparing for the possibility of needing long-term care is something everyone should think about before reaching retirement age. Medicare does not cover it, and Medicaid only pays after you have spent down your assets to a minimum.
About 70 percent of 65-year-olds, NerdWallet says, will need some long-term care services. Women usually need longer coverage than men because they live longer.
Apart from using your savings, there are two common ways to pay for long-term care. Long-term care policies are available, or you can buy a long-term care rider on a life insurance policy. Only some life insurance companies sell these kinds of policies.
Long-Term Care Policies
The services covered by a long-term care policy are not covered by a standard health insurance policy. They provide coverage for when care is needed in your home, a nursing home, an adult day care center, or an assisted living facility.The costs of these services are unaffordable for many people, and they may eat up most or all of your retirement savings if you choose to pay for them yourself. In 2024, SeniorLiving reports that a semi-private room in a nursing home costs on average about $294 per day or $8,929 for a month, $107,146 per year. A private room has an average price of $330 per day, $10,025 per month, or $120,304 per year.
Costs can also vary widely by state. Obtaining a semi-private room in Texas might only cost about $5,500, but you would pay over $19,000 for one in Alaska. These prices go up every year.
At one time, Kiplinger says, a long-term care policy would pay for an unlimited amount of time. Now, they limit the coverage from three to five years. Some people, about 20 percent of them will need coverage for more than five years.
You Choose the Payouts When You Buy
You do not need to buy a policy or a life insurance rider that will pay the entire bill. If the cost of care is $6,500 per month, you could have the insurer cover you for $3,500, and you pay the rest out of savings.
Besides being less expensive, another advantage of getting a long-term care rider on an insurance policy is that it is added to a whole life insurance policy. This means that even if you do not use the long-term care benefits, your beneficiaries will still get the full-face value of the policy when you die.
Long-Term Care Rider Payments Decrease the Face Value
Most long-term care riders enable you to get up to 70–80 percent of the value of the death benefit. PolicyGenius says that you will usually be able to get 1–3 percent of that amount from the life insurance company to help pay for your long-term care bills.When you need to receive long-term care benefits from your life insurance policy, it decreases the value of your death benefit. The benefits stop when you have spent the allotted percentage of the death benefit.
The Cost of Long-Term Care
Buying a long-term care policy differs for a man or a woman. RamseySolutions says that the average policy cost for a 60-year-old man is about $1,200 per year. It will give you about $165,000 for long-term care. A woman of the same age will pay about $1,960 annually for the same benefit.Couples may also be able to get a combined policy at a discount. PolicyGenius says that a couple at 55 years old can get a combined policy for $2,080. They are less expensive if you buy them when you are younger.
Life insurance companies offer to pay one of two ways. You can get a certain amount each month, or you will be on a reimbursement policy, where you send them your receipts.
A long-term care rider will not pay enough to cover all the bills related to the patient’s medical needs. A rider usually does not cover expenses for prescriptions, doctor’s visits, or surgeries.
Both Policies Have an Elimination Clause
After the individual has been diagnosed and approved for long-term care (meeting at least two of the six qualifications), there is a waiting period of about 90 days before they dispense any money. While waiting, you are responsible for all bills received covering that period.Evaluating How Much Coverage You Need
Before you purchase a policy or rider for long-term care, you need to evaluate how much money you can afford to put toward the expense. Other siblings, children, or relatives may also be willing to help cover the costs. It is also necessary to know how much the policy will cost. Remember also that the price of the policy and care may increase each year.Prices Vary Between Companies
Whether you buy a long-term care insurance policy or a rider on a life insurance policy, you will find that the coverage will be similar. There will, however, be a big difference in the cost between companies, so be sure to get some estimates.The benefit of having either type of policy is that you will receive far more benefits than it will cost. Since long-term care is so expensive, you want to get a policy sooner rather than later. MarketWatch says most people buy a policy before 65, but you can usually get one until you turn 79.
Washingtonians Have a Special Long-Term Care Program Available
If you live in Washington state, you may be lucky. The state has started Washington Cares, a program to help residents pay for their long-term care. Workers will pay a monthly sum into the fund, which guarantees them long-term care services regardless of any pre-existing condition. This state is the first to develop this kind of program.Deciding which type of policy is better for you is a choice of what you can afford. Other alternatives for funding long-term care may be available where you live. If you own your home, you may want to consider a reverse mortgage.
The Epoch Times copyright © 2024. The views and opinions expressed are those of the authors. They are meant for general informational purposes only and should not be construed or interpreted as a recommendation or solicitation. The Epoch Times does not provide investment, tax, legal, financial planning, estate planning, or any other personal finance advice. The Epoch Times holds no liability for the accuracy or timeliness of the information provided.
