Plan Ahead for Long-Term Senior Care

There’s an important question always looming in the background when it comes to planning for the future: how will we pay for it? Coming up with the money to afford long-term senior care for your loved one can present a true challenge. Too often, this burden comes as a surprise and falls upon your family to pay out of your personal savings.

How Much Does Long-Term Care Cost?

In the United States, the average cost of long-term care is high at face value. A private room in a nursing home costs more than $90,000 on average per year. While in-home help costs about half that, $45,000 per year is still a huge amount to pay out of pocket. You could easily face $135,000 to $270,000 or more in long-term senior care.

Unfortunately, government-sponsored insurance plans do not cover long term care needs. Medicare can cover up to 100 days of nursing care for rehabilitative purposes, but as you can see, the need often exceeds that number by a wide margin. And Medicaid is not an option for many people due to their income and assets.

Who Needs Long-Term Care?

With long-term care insurance, your benefits typically begin when one of two events occurs. Either you are diagnosed with a cognitive impairment such as Alzheimer’s or dementia, or you can no longer accomplish any two of these daily life activities independently:

  • Bathing

  • Dressing

  • Eating

  • Toileting—going to the restroom

  • Continence—controlling bodily functions

  • Basic mobility—transferring and/or ambulation

Rather than hoping for luck, you should know the probability of needing long-term care. Approximately 69% of all people in the United States will need senior care, and the average person will need the care for three years.

Thankfully, your family has insurance options. Long-term care insurance is the traditional, holistic option, guaranteed to cover your long-term care needs when they arise. On the other hand, hybrid life insurance policies offer long-term care insurance riders, which could provide your needs and suit your finances better than long-term care insurance alone, depending on your income and risk. Annuities with long-term care riders may also be an option. Research and discuss these plans with your loved ones to and a qualified financial advisor to see which strategy would be best for you.

Long-Term Care Insurance

Long-term care insurance has great benefits. For the same monthly investment, a long-term care policy can afford up to six times more in long-term care expenses than simply saving the money in the bank or investing it could. This policy would grant peace of mind that you can continue to provide for yourself even when age naturally makes everyday tasks more difficult. And it can provide for dignified care, allowing your family to remain family.

If you decide to purchase long-term care insurance, we advise purchasing a policy with a face value of no less than $500,000. With a 5-year benefit multiplier and a daily benefit amount of $275, at the age of 55, you would likely pay an annual premium of $5,578.02, according to Genworth’s calculator.

Experts recommend that an LTCI policy should not exceed 7% of your annual income, so this is a great option for middle-class to upper middle-class people to guarantee that the insurance meets their needs. Premiums raise significantly with age, so much that a 60-year-old individual purchasing the insurance might pay twice what a 50-year-old individual would. You and your loved ones should begin to consider long-term care insurance as an option by age 50 to give ample time for research on the best policies for you.

You should also consider purchasing inflation protection so that, over time, your benefit increases as the cost of care increases. Long-term care costs typically raise by about 3-5% annually. If you have a $275 daily benefit in 2017, you could receive a $289 daily benefit in 2018—saving you more than $5,000 in a year.

Hybrid Life Insurance

Hybrid life insurance is life insurance with a long-term care insurance rider, meaning that the face value of the insurance policy left unused after long-term care will pass onto family. If the policyholder does not need long-term care at all, the entire face value of the policy will be left to his or her heirs. Additionally, for many plans, if long-term care does exhaust the value of the policy, the family is guaranteed to obtain at least 10% of the face value of the policy. If you invest in a $500,000 policy, your loved ones will inherit at least $50,000 no matter what.

The average life insurance policy for a 55-year-old, non-smoking female in the Dunwoody area is $91. The long-term care insurance rider adds about 5-15% on top of that, bringing the average hybrid life insurance policy to approximately $100 per month. That’s about $1,200 annually. For a $500,000 policy with a 20-year term, you would pay about $24,000 total from your own finances.

This option could appeal to all kinds of families, especially those with modest incomes. By consolidating life insurance and long-term care insurance, hybrid life insurance can reduce premiums while providing a good base of long-term care coverage. Hybrid life insurance also guarantees that all of the money you allocate toward your care goes to good use.

The Need for Insurance

While no one can predict long-term care needs with total accuracy, you should make sure that you know your family’s medical history. If a family member has suffered a debilitating illness with age, consult a doctor to find out the likelihood that you or other family members will experience the same. Understanding your family’s own history of long-term care can help you to plan for your future, but you should also know that some preexisting conditions can affect insurance eligibility.

Long-term senior care can be intimidating, but you can find an affordable plan that covers your needs.

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