Should you buy long-term care insurance? That is a complicated question that is not easy to answer.
But before you can even start to answer that question, you have to know what long-term care insurance is. Long-term care insurance is used to pay for assistance when you can no longer accomplish certain activities of daily living on your own. Activities of daily living, also called ADLs, are the actions that you perform on a regular or daily basis
Basic ADLs are taking care of you, such as dressing, eating, mobility, prescription, administration, bathing, grooming and toileting. Functional or instrumental ADLs focus on your stuff, such as money management, shopping, food preparation, communication and community mobility.
Depending on your long-term policy, once you can no longer perform certain or a certain number of ADLs, the insurance will pay for assistance. Also depending upon the policy, the assistance could be in your home, independent or assisted living facility, adult foster care home or nursing home.
I have heard some people say they do not think that they need long-term care insurance because Medicaid will cover their nursing home expenses. The truth is that most of the time, with the exception of certain waiver programs, Medicaid only covers long-term care expenses in certain nursing homes, of which there are only five in St. Clair County.
Most long-term care insurance policies are much more flexible and will pay long-term care expenses wherever you live, whether you are in your home, or not. In addition, Medicaid may not exist in its present form when you need it.
Others have said they do not need long-term care insurance because there is a small chance that they will end up in a nursing home anyway. “It won’t happen to me.” According to an AARP survey, 43% of 65 year old persons will spend time in a nursing home. Of those, 55% will spend more than one year in a nursing home and 21% will stay more than five years.
1 in 1,200 homes burn down. Do you have homeowners insurance?
1 in 250 cars are in an accident, Do you have collision insurance?
1 in 2 people over 65 go into nursing home. Do you have long-term care insurance?
Still others have said that they cannot afford long-term care insurance. Well, if you are in your 70s and already have a debilitating illness, then long-term care insurance may be cost prohibitive. However, if you are relatively healthy and in your 50s, it can be surprisingly affordable.
For example, I recently obtained a quote for a 55 year old non-smoking male for a $150 per day benefit that would last for four years. The annual premium would be $1,625. If you paid this for twenty years, the total premiums you would have paid total $32,500. If you then needed nursing home care and the policy paid out, you would get those premiums back in only about seven months.
Long-term care insurance may benefit you. It is one option for paying for your care when you can no longer care for yourself. It can protect your family’s financial future and your own investments. There are qualifications that need to be met with health and age. This type of insurance is more expensive the older you get and almost impossible to get if age-related illness has already occurred. You may want to consider long-term care insurance.
By: Matthew Wallace CPA, JD
Published edited in Savvy magazine: Long-Term Care Insurance – Why?