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Why Should You Consider Long-Term Care Insurance?

Living a long life is likely; planning for it is a necessity. Most people envision themselves living a long life. They invest for a financially secure retirement and plan to spend those years doing the things they enjoy most. As part of your financial planning process, it’s important to understand how needing long-term care may affect your assets, your family, and your future. The cost of an uncovered long-term care event can range from tens of thousands to more than a million dollars, so it makes financial sense to manage that risk.

What are the potential impacts of needing long-term care?

The longer you live, the greater the likelihood that you may require long-term care. Although people don’t want to think about becoming frail or ill, if they haven’t planned for this eventuality, the consequences for their family and their finances could be catastrophic. According to the U.S. Department of Health and Human Services, 70 percent of people who reach age 65 will require some level of care services at some point in their lives. Keep in mind that long-term care is custodial care and is not covered by Medicare.

Financial impact.

The costs associated with long-term care are significant. According to the Genworth 2015 Cost of Care Survey, the annual median national cost of care in 2015 was $91,000 for a private room in a nursing home and $45,000 for home care. In 20 years, that will increase to $160,000 for a private room in a nursing home and $80,000 for home care. It can take decades to accumulate the assets you’ll need to retire comfortably, but just a few years of paying for long-term care may threaten a lifetime of savings.

A long-term care insurance policy provides an income stream to pay for future long term-care expenses. It helps ensure that your financial plan executes the way you intended, with enough money for your spouse to live on and assets eventually going to family members or charities rather than the health care system.

Impact on the family.

Providing care to a family member can take a physical and emotional toll. It can be burdensome for an elderly spouse, a child, or another relative to handle this responsibility. A long-term care policy allows the family to manage care rather than provide the care itself. 

Without a long-term care plan, some people spend down their assets paying for care and have no option but to stay in a Medicaid nursing home. A long-term care policy lets you choose where to receive your care, such as at home, in an assisted living facility, or in a private-pay nursing facility. In short, a long-term care policy protects your family, your finances, your quality of life, and the ability to maintain your independence.

This material has been provided for general informational purposes only and does not constitute either tax or legal advice. Although we go to great lengths to make sure our information is accurate and useful, we recommend you consult a tax preparer, professional tax advisor, or lawyer.



© 2016 Commonwealth Financial Network®