By Matt Lewis, CLTC®, Vice President, Insurance
In today’s world it’s fair to say that most reasonable people believe they are going to live a long life. And when you live a long life, it’s also fair to say that sooner or later, we’re going to need some form of care.
Seven out of 10 people will eventually require long-term care in their lifetime.1 How expensive that care is depends on where you live. However, the median costs nationally ranged from $1,690 per month for adult health care to $9,034 for a private room in a nursing home facility.2
When that time comes, if we’re not adequately prepared we may need to take assets from elsewhere to cover those costs. Or worse, rely on our families to foot the incredibly expensive bill and provide time-consuming care.
Let’s talk about the importance of long-term care insurance, why you might need it, go over the different types of long-term care and what to expect when going through the application process.
What Is Long-Term Care Insurance?
Essentially, long-term care includes your physical care, the services you’ll need and your housing solutions in your elder years. It also encompasses the type of assistance you’ll need with your activities of daily living in the future – eating, toileting, bathing, dressing and getting in and out of bed.
One misconception about long-term care insurance is that it’s cost prohibitive. But when you compare the premiums paid with the daily cost of care either in a nursing home or at home with skilled nursing, it’s more cost effective.
How do you picture getting older and needing care? Is it in your home? In a facility? Living with loved ones? Do you always want the same level of care or a graduated type of care that advances along with your needs? There are ways to prepare for all of those scenarios.
The Long-Term Care Coverage Choices
There are four basic choices when considering long-term care insurance:
- Traditional long-term care: This is usually an affordable way to cover any long-term care expenses. However, if you don’t use it, you lose it.
- Asset-based long-term care: This flexible option leverages your assets to realize cash value accumulation. It’s usually a more expensive than traditional long-term care.
- Life insurance with qualified long-term care insurance (QLTCI) riders: This type of insurance can be a good option if you want to pair coverage with life insurance. The downside is that premiums might not be tax-deductible.
- Life insurance with accelerated benefit (AB) riders: This is a policy that will allow you to have access to your death benefit prior to death for any qualified long-term care needs.
How to Plan for Long-Term Care Coverage
You should start with your financial advisor. Together, you can map out a plan for what kind of care you want to receive and how you’ll pay for that care when you need it. Examine whether you’re creating a new batch of money to cover long-term care costs or if you’re taking assets from somewhere else to cover the costs.
Once you and your advisor have determined the kind of protection that is best suited for you, the process starts by filling out an application for coverage.
Many parts of the underwriting process are based on age demographics. Underwriters for long-term care insurance are looking at morbidity, versus mortality. This can include not only your health but your family health history. For example, did your mom and dad have any cognitive impairments or immobilizing ailments? It can be a less arduous underwriting process for someone who is healthy and doesn’t have a long family history of degenerative or other diseases.
The ideal time to secure long-term care insurance is when you are in your late 40s or 50s. The kids are out of college, you’re in our highest earning years, and you’re still relatively healthy, so it’s the optimal time to get a more manageable premium.
The Bottom Line
When it comes to protecting your family, life insurance is often considered the greatest gift you can leave for your loved ones. When it comes to protecting a lifetime of work and savings, long-term care insurance may be a close second.
The reality is, if you don’t make a plan for your long-term care your loved ones will be forced to step up physically, emotionally and financially. In fact, one report found that 43% of working caregivers may be forced to choose between working and continuing to provide care for a loved one.3
Putting together a solid long-term care plan can be a gift to your family members so they don’t have to make that choice.
1 LongTermCare.gov, “How Much Care Will You Need?” 2/18/2020.
2 Genworth, “Cost of Care Survey,” 6/2/2022.
3 Benefits Pro, “Stress levels grow for workers who are caregivers: What employers can do,” 10/27/2021.
Matt Lewis is a non-producing registered representative of Cetera Advisor Networks LLC.