Planning for Long-Term Care
You can't know for sure if you'll need long-term care or for how long, but you can plan for the possibility that you'll one day need expensive long-term assistance if health problems result in a loss of independence.
What Exactly is Long-Term Care and Why Might I Need Insurance for It?
Long-term care provides medical and personal care for people of all ages who can't independently perform basic daily living activities, such as bathing, dressing, eating and getting around, due to illness, injury or cognitive disorder. Care is available in a number of settings, including private homes, assisted-living facilities, adult daycare centers, hospices and nursing homes.
Long-term care is available in three basic forms:
- Skilled care: Continuous care, ordered by a physician, designed to treat a medical condition. This care is performed by skilled medical personnel, such as registered nurses or professional therapists.
- Intermediate care: Intermittent nursing and rehabilitative care provided by skilled medical personnel under the supervision of a physician.
- Custodial care: Personal care that's often given by family caregivers, nurses aides or home health workers who provide assistance with activities of daily living.
Studies suggest that almost 70% of those over age 65 will need some type of long-term care for three years, and 20% will need care for more than five years. More than two-thirds of those needing care will require nursing home services.
But Medicare does not cover long-term care, and nursing home care averaged $82,128 a year in 2016. A home health aide is expensive as well; in fact, hiring one can cost as much as $21 an hour, more than $500 a day for round-the-clock care. (Source: 2016 Genworth Cost of Care Survey)
The chances of needing that level of care increase as we age. Having a plan in place may help you feel more secure in retirement, offering peace of mind knowing you're better able to manage your financial situation and access quality care, if and when you need it.
What Should I Look for in a Long-Term Care Insurance Policy?
Of course long-term care insurance comes at a price, but the cost depends on many factors, including the type of policy and your age at the time you purchase the policy (most consider mid-50s the ideal age to begin considering LTC insurance).
It's important to shop around and compare several policies before making a decision. Read the documents carefully and make sure you understand the benefits, exclusions and provisions. Once you find a policy, check insurance company ratings to find out if the company is financially stable.
Before you buy a policy, pay close attention to these important features:
- Benefit amount: The daily benefit amount is the maximum your policy will pay for your care
- Benefit period: The length of time your policy pays benefits
- Elimination period or waiting period: The number of days you'll pay for care before the policy begins paying, especially when it comes to treating pre-existing conditions
- Types of facilities covered: Private homes, assisted living facilities, adult day care centers, hospice and nursing homes
- Guaranteed renewability: The ability to maintain coverage despite changes in your health
- Range of care: Coverage for different levels of care
- Inflation protection: Usually an optional rider to protect against inflation, increasing your benefits by a certain percentage each year
- Any exclusions: Certain conditions may not be covered
- Premium increases: Whether your premiums will increase during the policy period
- Return of premium: Nonforfeiture benefits if you cancel the policy after paying premiums for a certain number of years
- Prior hospitalization: A hospital stay may be required before you qualify for benefits
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Deciding if long-term care insurance is right for you depends on your personal circumstances and your anticipated future needs. I am happy to answer any questions you may have and help determine if long-term care insurance makes sense for your situation--and how it fits into your overall retirement plan.
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Adapted from the Raymond James whitepaper "Planning for Long-Term Care," 2016. Material prepared by Raymond James for use by its financial advisors.
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