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What is Long Term Care? Do I Need It?

July 05, 2022

What is Long Term Care? Do I Need It?

Long-term care is the services and support a person needs to live a comfortable life, especially in their old age when they can no longer do everything for themselves. As long as you're aging, there's a high likelihood you'll need long-term care at some point in your life.

As retirement beckons, it's inevitable to start thinking about your care as you age. Questions like what will happen when I can no longer do the things I do today begin to crop up? With statistics showing that at least 60% of US retirees will need assistance as they age, one of your best bets for living a comfortable life is investing in a long-term care policy.

Benefits of Long-Term Care Insurance

A long-term care insurance policy cushions you against digging into your savings as you age to pay for care if you have a chronic medical condition. Whether you've had an accident, are disabled, or have a disease such as Alzheimer's, a long-term care policy ensures you get the help you need without paying out of pocket. The main trigger point for coverage to begin on a long-term care policy is being unable to perform two of the Daily Activities of Living. These include bathing, dressing, eating, transferring, toileting and continence.  Most policies have what a referred to as a 90-Day elimination period, meaning, you must not be able to perform two of the six activities for 90 days in a row to begin getting benefits. However, some policies can be set up for coverage to begin after 0 days.

One of the most significant reasons to invest in this type of insurance is that regular medical insurance doesn't cover long-term care. Without a long-term care policy, you'll have to pay out of pocket if you need custodial care or spend long periods in a nursing home.

The two most significant advantages of buying long-term care insurance are:

It Protects Your Savings

As you age, you need a healthy nest egg to last you the course of your life after retirement. Therefore, it's essential to put in place plans that ensure you have some sort of help for larger medical expenses, as they can pile up fast.

For instance, statistics show that the annual cost of long-term care in a semi-private nursing home is upwards of $90,000. A private one-bedroom in an assisted living facility would cost at least $50,000, while a home health aide would set you back approximately $54,000.

The least median expenditure you can incur for long-term care would be just under $20,000 in an adult day health care facility, which means you wouldn't have access to the support you may need during the night.

However, with a long-term care policy, you can either have the full cost of care covered, or a good portion, depending on how much coverage you want the policy to have. “Coverage” on a long-term care policy is in reference to the monthly/ annual amount the policy will pay you to reimburse you for the medical costs.

Allows You to Choose the Care You Want

One of the best benefits of long-term care insurance is that it gives you more care choices. By availing more money to spend on care in old age, these policies allow you to choose the best care available without worrying about digging deeper into your retirement nest egg.

Relying on Medicaid alone means you can only seek the care you need in nursing homes that accept the government plan. Even then, you would only be allowed to spend a limited period receiving care as Medicaid doesn't cover assisted living expenses in most states. Relying on Medicaid will also force you to spend down your assets and get your income below certain levels a year to be covered by Medicaid. (these income levels are very low)

Traditional VS. Hybrid Long Term Care Insurance: Which is Best?

The “best” long-term policy depends on your needs. While these two policies generally cover the same expenses, they have a few differences. For starters, hybrid long-term care insurance typically costs more.

However, traditional long-term policies generally have higher benefit payments than their hybrid counterpart. Nevertheless, perhaps their biggest difference is their value if you don't end up using them.

You don't get any payouts if you never claim from the traditional policy. In other words, they are a use it or lose it type of deal. On the other hand, hybrid policies have a life insurance clause that pays out some benefits to your listed beneficiary after your death if you never use any of your long-term care benefits.

The Rising Cost of Long-Term Care

Experts estimate that over 20 million Americans will need long-term care by 2030. Similarly, as chronic conditions increase, so will the complexity of the care individuals need, which will also drive up long-term care costs.

According to statistics, long-term care costs will rise to approximately $2.5 trillion in 2030, up from $849 billion in 2018. For the most part, long-term care has been provided for free by family members, but with the rising costs of living, there's an increasing need to invest in LTC insurance.

Next Steps

This conversation is part of the holistic plans we like to put together here at Elevated Wealth Advisory. Click on our link below to schedule a brief introduction call to review options for a long-term care policy for you and your family today.

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