Dear Carrie: I'm a single, 43-year-old female and have saved money my entire life. I keep hearing about long-term care insurance. Is this something I should buy? -- A Reader
Dear Reader: As our population ages, it's not surprising that you're hearing more and more about long-term care (LTC) insurance. According to the U.S. Department of Health and Human Services, 9 million Americans are expected to need long-term care this year. As of 2020, that number goes up to 12 million. Other stats suggest that at least 70 percent of people over age 65 will require some type of long-term care at some point in their lives.
While these numbers might seem to make a strong case for LTC insurance, when it comes down to making an individual decision, it's not so cut and dry. A lot depends on your personal and financial circumstances.
For instance, if you have family to help care for you, that might minimize your need (realizing, of course, that providing on-going care can be a huge task for anyone). Or paying for care out-of-pocket may be an option for those with considerable assets. At the other extreme, people with a low net worth might qualify for long-term care provided under Medicaid. For many, though, LTC insurance can be a good choice. It's really a matter of looking at a number of factors and seeing what makes sense. Following are some of the things for you to consider.
The cost of long-term care
Long-term care refers to help with what insurers call the "activities of daily living" such as bathing, dressing, eating, using the bathroom and moving, and may include home health care, adult daycare, nursing home care or a group living facility. The cost of this care can be staggering -- from $10,000 to upwards of $150,000 per year depending on where you live and the type of care you need. And what many don't realize is that Medicare and other types of health insurance don't cover most of this type of care. For instance, Medicare will only pay for medically necessary skilled nursing and home care, not assisted living costs. And just for the record, Social Security doesn't pay for any type of long-term care.
How LTC insurance fills the gap
LTC insurance is designed to cover a wide range of services. But all policies are not alike, so it's very important to read and understand the fine print. Things to look for include:
-- What medical conditions qualify for benefits?
-- What's covered: Skilled nursing? Custodial care? Assisted living?
-- How long before benefits kick in? How long will they last?
-- What's the daily benefit?
-- Do benefits factor in inflation?
-- How will your benefits be paid? Cash? Reimbursement?
-- How solvent is the insurer?
I'm not implying that LTC insurance doesn't do what it's supposed to. I just mean you have to comparison shop carefully to make sure you're getting the coverage you want at the best price. Which brings us to the next point.
Timing the purchase
LTC insurance isn't cheap. And the older and less healthy you are when you buy it, the higher your premiums. (Also realize that as you age you may become uninsurable if your health deteriorates.) The National Association of Insurance Commissioners states that by some estimates, LTC policies on a national average cost close to $900/year at age 50, over $1,800/year at 65 and almost $6,000/year at 75. In some states, premiums can be a lot higher.
Because this can be such a big financial commitment, you really have to weigh the expense against the risk of having to pay for care down the road. And although there isn't one perfect time to purchase LTC insurance, age 43 is on the young end; at your age, you could end up paying premiums for 40 years or more. Although it's hard to generalize, LTC insurance tends to be most cost-effective for those between 50 and 65 who are in good health. But I'm a big proponent of planning ahead. And as a life-long saver, it sounds like you are, too.
The best thing to do right now is to look at long-term care insurance in the context of your overall financial situation. Also think about your own health and family history. If you decide to wait, that's fine, but it's never too early to do some additional research. Talk to your financial advisor. You can also get information from an objective source such as your state insurance department. Look at individual policies, and check to see if there might be a group policy offered through your employer or a professional association.
You may never need LTC or LTC insurance, but as with all things financial, it's wise to consider your options well in advance. Best of luck as you continue to build a secure financial future.