Should You Purchase Long-Term Care Insurance?

At least 70% of people over age 65 will need some form of long-term care services.[1] Perhaps a more surprising statistic is that 40% of those receiving long-term care in 2015 were between the ages of 18 and 64; up from 19% in 2010.[2] Age is not a determining factor in needing long-term care.

Unlike traditional health insurance, long-term care insurance is designed to cover long-term services including personal and custodial care in a variety of settings such as your home, a community organization, or other facility.

Individuals who require long-term care are generally not sick in the traditional sense, but instead, are unable to perform the basic activities of daily living (ADLs) such as dressing, bathing, eating, toileting, continence, transferring (getting in and out of a bed or chair), and walking.

Meet James and Patricia, both are age 67. They have two adult children, Melissa who is 38 and Michael who is 35. James and Patricia are now retired and have done a good job saving through their working years. James has been diagnosed with Alzheimer’s disease and the dementia symptoms have progressed, requiring constant supervision.

His family is now at a decision point:

  • Patricia could care for him at home with assistance from family

  • The family could hire someone to come to the house

  • The family could move James into a care facility

One of the biggest things that will factor into this decision is cost. But we cannot discount how each option might also have an emotional and physical impact on members of the family.

Let’s assume it’s recommended that James receive 24-hour care in a nursing home. In California, the median annual cost of a nursing home is $91,250 - $112,055.[3]

There are several options to pay for care:

  • If they have sufficient funds set aside, they could pay for care out of their assets

  • If they deplete their assets to $2,000 they could enroll in Medi-Cal

  • They could ask their children to help pay for some of the cost

For most people, these are less than desirable options. As a fourth option, they can use their long-term care insurance which provides a specified benefit amount based on the needed care.

What did James and Patricia do?

Fortunately, Patricia saw the value of long-term care insurance and purchased a policy as part of their family insurance planning. Their policy pays $200 per day. Their share of long-term care expenses is $1,520.83 per month, saving them $73,000 per year.

[1] 2015 Medicare & You, National Medicare Handbook. Centers for Medicare & Medicaid Services, September 2014

[2] Genworth Beyond Dollars Study, July 2015


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