1. You are likely to Need Long-Term Care Someday. "Long-term care" refers to the assistance that frail, disabled or chronically ill people need on a daily basis over an extended period of time. 70% of baby boomers turning 65 this year will need long-term care services and supports at some time during the remainder of their lives. 20% of them will need care for five years or more. In addition to the enormous physical and emotional burdens placed on the care recipients and their families, the financial costs can be staggering.
Long-term care costs can easily bankrupt the care recipient and destroy a family's financial security. The average cost for a semi-private nursing home room in Williamsport PA in 2012 was $94,535. A private room was $108,040. And home and community-based care is growing more expensive each year. Long-Term Care Insurance (LTCI) safeguards your income and savings and that of your family.
If you buy a policy, what are the chances you will actually use it? According to the American Association for Long-Term Care Insurance there is a 50% probability that someone who buys and keeps a zero day elimination period LTCI policy at age 60 will use their policy someday. That probability declines to 35% if the policy has a 90 day elimination period. It increases a little if the policy is purchased later than age 60.
2. Medicare does not cover Long-Term Care. The costs of long-term care services and supports are generally not covered by Medicare or other health insurance. (While Medicaid can help cover long-term care costs, it does so only after you have spent down to that program’s austere income and asset limits). Unless you purchase insurance with long-term care benefits, you are effectively uninsured.
3. LTCI can give you care options you would not otherwise have. LTCI can help ensure that you will always be able to afford the best possible care in the most appropriate setting. It can help you stay home and out of a nursing home. More than half of all LTCI claims are paid for home care.
4. LTCI can have some limited tax benefits. Proceeds from qualified LTCI policies are tax-free and some premiums may be tax deductible.
5. You have to Buy LTCI before you need it. The risk of needing long-term care increases as you age. Among people age 85 and older, half need some long-term care services and supports. LTCI premium costs also increase with your age at purchase. And, if you wait too long you won’t be able to get insurance. Once you develop a serious medical condition, you will no longer qualify for coverage.
Long-Term Care Insurance may or may not be a wise investment for you. It is a complicated financial product with many options and variations. But, if you are going to make this investment choice, you may want to make it now rather than waiting until it’s too late.
Long Term Care Commission’s Report to Congress (September 30, 2013)