Long-Term Care Insurance: What You Need to Know
The average cost of a private room in a nursing home is about $200 a day,
or roughly $75,000 a year, according to a survey by the MetLife Mature
Market Institute. And by 2020, 12 million older Americans will need
long-term care, including nursing home stays, according to the U.S.
Department of Health and Human Services.
How can families handle this expense? Health insurance pays the cost of
the care you might need to recuperate from an illness or injury. A long-term
care insurance policy, on the other hand, covers many needs of those who are
determined to be chronically ill. This may include nursing home stays, as
well as adult day care costs and assistance at home for those who can’t care
for themselves, according to the Iowa Society of Certified Public
Accountants.
The best candidates
Long-term care policies are best for people who aren’t wealthy enough to be
able to pay for a lengthy nursing home stay or in-home care out of pocket,
but who do have enough assets to disqualify them from government assistance.
Long-term care insurance will help prevent depleting savings–and wiping out
children’s inheritance–for those who are disabled or face a debilitating
lengthy illness. Having a long-term care policy may also provide greater
control over the care that is received.
Qualifying to collect
To receive payments on a policy, it’s not simply sufficient for a loved one
to decide that the policyholder is no longer able to care for themselves.
Instead, the person covered must be unable to perform at least two of the
regular activities of daily living set forth in many policies. These
activities typically include bathing, dressing, eating, and getting around
the house alone, among others.
Be aware of the options
There is not just one type of long-term care policy. There are many choices
within each policy, including what’s covered under what circumstances, and
each one will affect the cost of premiums. For example, some policies
reimburse for a variety of types of care, while others might cover only
nursing homes, assisted living arrangements, or in-home care. The policy
premium will vary, too, based on what maximum daily or monthly benefit
coverage amount you want to receive. Another variable is the policy benefit
period, or how long the insurer will pay for your care. You’ll have to
consider, as well, the elimination period which is the amount of time you’ll
have to wait until your payments begin.
Your age will also affect premium cost. Payments will likely be lower for
those in their 50s, for example, than for those in their 60s, but they are
likely to rise as you get older.
Don't overlook retirement savings
While long-term care policies can provide an excellent safety net, CPAs
point out that they are just one of many issues to consider in retirement.
It’s also important to remember to adequately fund your 401(k) or other
retirement account. You may never need to spend money on long-term care, but
you will almost certainly quit working someday and want some sort of
financial cushion during retirement. So, in general, CPAs recommend that you
accumulate sufficient retirement savings before you start setting aside
dollars for long-term care.
Seek advice from you CPA
Planning for future needs is clearly a complicated process, but help is
available. Your CPA can offer guidance on how to shop around for the right
long-term care policy and how to navigate the many choices associated with
retirement and aging.
Access “Find a CPA.”
