How Long-Term Care Insurance Could Save Your Retirement

Nobody likes thinking about it. Nobody likes talking about it.

If you bring it up at a dinner party, somebody will change the subject to something more uplifting, less sobering and easier to think about.

The subject? Long-term care insurance.

See? I bet you’re already debating about whether you should keep reading this article. For your own sake, keep reading. Because this information could literally change your future—and the futures of those you love.

What Is Long-Term Care Insurance?

Long-term care (LTC) insurance isn’t the same as long-term disability, which temporarily replaces a percentage your income should you not be able to work. And LTC insurance is not the same thing as health insurance, which helps pay the costs connected to a medical event, like a surgery or a sinus infection. LTC insurance eases the costs for hands-on help for an extended length of time if you can’t take care of yourself. It covers services like:

  • Bathing
  • Dressing
  • Eating
  • Housekeeping
  • Meal preparation
  • Occupational therapy
  • Physical therapy

Besides paying for these services to take place in your home, which is becoming more popular, LTC insurance can also help pay for facility-based care, which includes:

  • Adult day care centers
  • Hospice care
  • Respite care (provides time off for family caregivers)
  • Assisted living facilities (also called residential care facilities or alternate care facilities)
  • Alzheimer’s care
  • Nursing homes

Before you choose an insurance company or policy, find out which facilities in your area are included in the plan. You wouldn’t want to purchase the insurance only to find out the location is inconvenient for you or family members.

Why Should I Get Long-Term Care Insurance?

Good question. The answer is simple: Long-term care can be freaking expensive. According to Genworth, the average annual costs in 2016 were:

  • Home health aide: $46,332
  • Adult day care: $17,680
  • Assisted living facility: $43,539
  • Nursing home: $82,125 (semi-private); $92,378 (private)

Even if you create a good-sized nest egg, you could blow through that money quickly if you needed long-term care. LTC insurance is another tool to guard your wealth not only for your own future but also for family and loved ones.

How Much Does Long-Term Care Insurance Cost?

Think of long-term care insurance like your auto insurance. You can get basic coverage at a lower cost, or you can get full coverage for a higher premium. And like car insurance, you can select options to be covered in your plan. The cost of LTC is based on:

  • Your age when you buy the policy (the younger and healthier you are, the cheaper the cost)
  • The maximum amount the policy will pay per day
  • The maximum number of days (or years) the policy will pay
  • Optional benefits, like caring for pets, or grocery shopping

Once LTC insurance kicks in, the insurance company would reimburse you a daily amount for services up to a predetermined limit. Some policies will pay the costs for two to five years, but a small number of companies will pay the costs as long as you live. Of course, premiums on those policies will be more expensive.

Even if you buy LTC insurance while you’re young-ish and healthy, the premiums will increase over time. While companies can’t single you out for a rate hike, they can raise the price for a group of people with policies similar to yours.

What Else Should I Know?

Before you buy long-term care insurance, there are some other things you need to know. Being aware of these could make a huge difference in the kind of coverage you get and the cost you pay for it.

  • Buy long-term care insurance when you turn 60. The likelihood of needing it rises dramatically from that time on.
  • Shop around. Costs and coverage can be widely different among companies. There is no one-size-fits-all policy.
  • If both you and your spouse purchase LTC insurance at the same time, some companies will give you a discount.
  • You can usually decrease the amount of coverage, but it’s hard to increase it—especially if your health has declined. You want to buy enough insurance, but not too much (it costs more).
  • Don’t feel pressured into making a decision. This is your money and your future!
  • Allow room in your retirement budget for premiums to increase over time. You may be able to afford it now, but make sure you can still afford it later on.
  • Not every policy covers everything. Some plans only pay for room and board. Supplies, medication, linens and other items would be extra.

Before you purchase LTCI, compare premiums and coverage from at least three different insurance carriers. And if you don’t know where to start, you can go to my website and click on Dream Team. You’ll get a list of people in your area who know the ins and outs of LTC insurance.

Here’s the deal: Bad stuff will happen. Some things are simply not under your control. That’s what LTC insurance is for. Remember, insurance is about transferring risk away from you and onto an insurance company. It’s a way to protect your wealth so that you don’t have to worry about any debt you’d leave behind.

Purchasing LTC insurance is one of the most loving things you can do for your family.