Did you know that today’s 65-year-olds stand a 70 percent chance of needing long-term care at some point in their lives? And 20 percent of them will need that form of nursing care for longer than five years. If you’ve ever taken a look at the cost of nursing homes or home-based care, you know that retirees today are facing a serious financial risk. Even if you’re nowhere near retirement age, this is still an issue that will affect you someday.
Long-term care insurance can help you address this risk, but don’t just rush out and sign up for a policy. Take these four steps to help identify the right plan for you.
Know your risk. Take a look at your family history, and consider your own lifestyle and state of health. What type of care are you more likely to need someday? Do you have family who could step in and help?
Measure the cost. The cost of long-term care can vary considerably according to region. Investigate prices in your area. The national median rate for a semi-private room in a nursing home is $220 per day. It’s $250 per day for a private room, and the price of home-based care can vary wildly. Consider these costs with regard to your expected budget in retirement, keeping in mind that Medicare covers very little of these costs. How much insurance will you need?
Examine the terms carefully. All forms of insurance vary in their offerings, and long-term care insurance is no different. In this case, your benefits will be subject to an “elimination period”, or a period of time before your insurance policy kicks in. For example, you might be subject to a 90-day elimination period, during which time you are responsible for the entire cost of long-term care. After that point, your insurance will pick up the tab according to the level of coverage you selected. A longer elimination period can mean a lower premium, whereas a shorter elimination period usually means higher premiums.
The are other terms you should carefully consider, such as the benefit period (how many years the policy will cover long-term care), and inflation protection (to protect you against rising prices of healthcare).
Buy coverage early. You can achieve a lower premium by enrolling in a long-term care insurance policy earlier. This is an issue to begin investigating in your fifties, as you start to think about retirement.
Professional guidance can help you answer questions and understand the benefits and limitations of long-term care insurance. Give us a call and we’ll help you sort through your options.