Should I Buy Long-Term Care Insurance?

The umbrella phrase “long-term care” refers to a variety of services one might need to ensure their health and personal needs are taken care of when they can no longer do so on their own. Purchasing long-term care insurance is one of the avenues people can take to plan for this. Other avenues include paying for long-term care with savings, using a life insurance rider or relying on government assistance; the best choice is completely dependent on each individuals’ situation. 

What to Know About Long-Term Care

Thinking about long-term care is a critical consideration as you plan for retirement. According to a 2023 report, 91% of Americans acknowledge the importance of planning for long-term care, but the majority of people don’t have a plan to pay for it. That puts a heavy burden on family members, one that may cause financial difficulties as the average value of uncompensated work done by caregivers is over $7,000 per year. 

Despite the understanding of its importance, and a drive to keep the burden from falling on the next generation, many people struggle to plan appropriately for the rising costs of long-term care. Here’s what you should know. 

Who Needs Long-Term Care?

Approximately 70% of Americans who are turning 65 today will need long-term care at some point in their lives. However, most people fail to plan for long-term care. This could be for a variety of reasons: hesitancy to pay for additional coverages they may not need, a difficulty with thinking about their own incapacity or a misunderstanding of the cost of long-term care. 

In 2023, the average cost of an in-home health aide was $75,000 a year. The costs of assisted living facilities and nursing homes were driven up due to inflation and a shortage of skilled care workers.  

In short, odds are high that you will need some kind of long-term care, and that care may be costly. Failing to plan for the expenses associated with long-term care could significantly strain your financial resources.

Levels of Long-Term Care

There are different levels of long-term care, each with its own cost and considerations, depending on the amount of assistance needed. 

In-home care involves a nurse or registered heath professional assisting with care and tasks, typically when the help is short-term (like when recovering from an injury) and not needed 24/7. The tasks assisted with may include therapy, wound care, health monitoring and help with bathing. 

Assisted living facilities offer a blend of care and independence. Residents can receive help with daily tasks, have access to social outings and receive other beneficial care. The home-like atmosphere and flexibility make this a common avenue for people who cannot live on their own but don’t need a high-level of assistance. 

Nursing homes offer a higher level of care than assisted living facilities, often providing meals, therapy, medication administration, 24/7 care and other daily-living assistance. 

Hospice care provides comfort and care for terminally ill patients, either in a facility or at home.

Paying for Long-Term Care

As of 2023, average annual costs for long-term care can range from approximately $55,000 to $176,000 depending on state of residence. That’s a significant outlay to plan for on your own, though some people do rely on saving enough to cover these costs. There are some other options: 

Government Assistance  

Medicaid is the primary public payer for long -term care services. Income levels may restrict the access and benefits of Medicaid, as it is mostly for low-income Americans.  Each state operates its own program, so guidelines can vary. 

Medicare does not provide most long-term care services but can be accessible for those over the age of 65 or who have a permanent disability. Medicare only provides short term care services and has more restrictions, however hospice care may be covered. 

Standalone Insurance 

Long-term care insurance covers things that a health insurance policy does not, including help with daily activities or care for a chronic condition like Alzheimer’s. Having a policy protects people from depleting their savings before receiving governmental assistance.

Life Insurance With a Chronic Illness Benefit Rider

Some life insurance policies can be used to personally fund long-term care. Many life insurance policies have optional riders that can be added so that the insured can access funds to cover their long-term care needs. 

When to Buy Long-Term Care Insurance

Purchasing long term care insurance can be done at any time, but it is a cost-benefit analysis. You want to ensure you purchase it early enough so that you get the coverage you need at a reasonable cost but purchasing it too early may mean paying more premiums than necessary. According to the American Association for Long-Term Care Insurance, the best age to apply is mid-50s.

Here for You

No matter when you are ready to start planning for care, your Farm Bureau agent or advisor can help you put a plan in place to help ease the financial burden of long-term care.