Aging baby boomers, and even younger folks looking to make a plan for their future, may look to long-term care insurance to try and help offset the rising costs of care.
The Rising Cost of Insurance
Long-term care insurance is coverage that will pay out benefits in case you become unable to care for yourself. This insurance can generally be used to pay for assisted living facilities, nursing homes or for home health care. You can customize a policy based on what you can afford. But beware — there have been substantial rate hikes in the long-term care insurance industry in the past few years. The cost of long-term care insurance has risen an average of 9 percent in just the past year. A married couple, both partners age 60, can expect to pay $2,170 per year for $328,000 worth of coverage, which is up from $1,980 last year, according to Kiplinger. If you add extras to that policy, such as inflation protection, then the premium will be much more. There’s no guarantee that you will actually ever need the insurance, making people wonder if it’s a smart financial move to pay thousands of dollars per year on coverage that might never be used.
What Coverage Do You Need?
There are so many coverage options available in a long-term care policy. It might be prudent to take a good look at your overall health, genetic issues and heredity longevity. Assess your access to family caregivers. If you feel confident that you’ll be able to receive care in your home, you could purchase a policy that provides less of a daily benefit than looking at a policy to cover your stay in a nursing home. You could easily spend three times as much or more in yearly premiums by trying to cover the daily cost of nursing home care.
Ways to Lower Your Cost
Perhaps you feel that you don’t need all the expensive bells and whistles offered by certain policies. If you choose a policy with a longer elimination period (the time at which benefits will kick in), you’ll pay substantially less than opting for a policy with a zero-day elimination period. Most people start planning between ages 52 and 64 for care, according to the American Association of Long-Term Care Insurance. If you purchase your policy earlier, you stand to save a lot of money on your yearly premiums.
What About Medicare or Medicaid?
Don’t rely on Medicare to pay for your long-term care. Medicare typically only pays for care following a hospitalization or an illness, and it only pays for a limited amount of time. Medicaid would only kick in after you’ve exhausted all of your assets, and having Medicaid may limit the types of places that’ll accept you as a patient.
Alternatives to Long-Term Care Insurance
There are other ways that can help pay for your long-term care. Some life insurance policies now offer long-term care benefits. Health savings accounts allow you to put money aside tax-free for medical costs and long-term care. A reverse mortgage allows you to tap into your home’s equity, which you can use to pay for expenses. Talk with you financial adviser about your concerns and goals. He or she can help you craft the best plan for your long-term care.