Long Term Care Insurance

What is Long Term Care Insurance?

Long term care insurance (LTCI) is designed to help pay for expenses associated with nursing home care, in-home care, or assisted living.  Starting around age 65, many people develop chronic illnesses that impair activities of daily living (ADLs), including bathing, dressing, eating, toileting, continence, and transferring (getting in/out of bed or chairs).  People with these impairments may need 24-hour care in some cases, which can be very expensive.  By purchasing Long Term Care Insurance before you become ill, you can be prepared for unexpected medical problems that might affect you in the future.

Why Purchase Long Term Care Insurance?

According to the Centers for Medicare and Medicaid Services (CMS), about 60% of people age 65 and over will need some type of long term care services during their lifetime.  Although you may not think you need long term care now, the American Association for Long Term Care Insurance (AALTCI) says the best time to think about long term care is in your 50s.  Of the approximately 100 million Americans over age 50, only about 8 million have purchased this type of protection – only 8 percent!  With average nursing home care costs exceeding $77,000 annually, it is surprising that more Americans aren’t taking advantage of long term care insurance. It could ensure that you don’t lose your nest egg to an unexpected health problem.

The Benefits of Long Term Care Insurance

  • Allows you to maintain your independence as you age and gives you the option of being cared for in your own home (if recommended by a doctor), or in a nursing home facility.
  • Prevents you from losing your nest egg (IRA, 401k, etc.) or even your home due to the high cost of healthcare services.
  • Prevents you from becoming a burden on your loved ones, improving the quality of life for you and your entire family.
  • Provides tax advantages that could help you make the most of the money you have.

The Costs of Long Term Care in America

American nursing home care costs are staggering.  Many people approaching retirement age would be shocked to learn that a one-year nursing home stay could cost $77,000 or more.  Even more frugal solutions, such as assisted living or in-home care, are beyond the price range of many retirees.  Here’s a breakdown of average annual long term care costs in America:

  • Nursing Home (Private Room) – $77,000+
  • Nursing Home (Semi-Private Room) – $70,000
  • Assisted Living Facility – $40,000
  • In-Home Care – $20,000 (based on 20 hours per week of in-home care)

*Source: Center for Retirement Research at Boston College

When you consider that Social Security pays out around $14,760 (on average) to $30,156 (at the most), and that Medicare generally doesn’t cover the full amount of long term care expenses, it’s only logical to ensure you are covered against unexpected health problems by purchasing extra insurance.

Types of Long Term Care Insurance

  • Traditional Long Term Care Insurance
  • Asset-Based Long Term Care Insurance
  • Home Health Care

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