You’ve heard it before, and you may have said it yourself:—“I’m not going to live in a nursing home,” or “I won’t need long-term care, nothing is going to happen to me.” That’s just not true. More than two-thirds of people over age 65 will need some type of long-term care in their lifetime, according to the Administration for Community Living, a division of the U.S. Department of Health and Human Services. The cost of long term care certainly doesn’t come with a small price tag—According to the 2020 Genworth Cost of Care Survey, the median cost of a private room in a skilled nursing home exceeds $8,800 a month.
The reality is a long-term care event in your life is quite possible, and the definition of long-term care is broader than living in a nursing home. Basically, it means needing assistance with two or more of your six activities of daily living (bathing, continence, dressing, eating, toileting and transferring) for more than 90 days. Many people mistakenly believe that Medicare will cover long-term care. Medicare Part A may cover care that is deemed medically necessary at a certified skilled nursing facility for up to 90 days, but if you need custodial care for a condition such as dementia, Medicare won’t cover the costs. Medicaid will, but only for lower-income Americans.
It is difficult to predict how much or what type of long-term care a person might need. Several things increase the risk of needing long-term care:
A long-term care insurance policy gives you peace of mind, but it comes with a cost. Premiums are continuing to increase, due in large part to the rising cost of care and historically low interest rates. Therefore, it’s important for you to consider the cost of long-term care and how you’re going to manage that risk.
When you self-insure, any long-term care needs you have will be paid out of your own pockets. If you have sufficient assets, you may conclude that you can handle the cost of long-term care. However, if you’re married, you may still want to consider buying a long-term-care insurance policy, as the chances are higher that at least one spouse will require long-term care. These costs could deplete your combined savings, leaving the other spouse with little to no resources. On average, men will need just under three years of care and women will need just under four years of care. For those needing care due to a cognitive impairment (dementia, Alzheimer’s, etc.) the length of time that care will be needed can be considerably longer.
Another option that some families plan for is relying on family and friends to assist with long-term care. Maybe the children have bought a home with a second master bedroom on the main floor, so when their parents get to the age when they can’t take care of themselves, they can move into that main floor and the children will be there to take care of them. If you go this route, it’s important that you discuss this ahead of time so they know exactly what your wishes are.
You can do this in various ways—a traditional long-term care policy or a hybrid long-term care policy that is a combination of life insurance and long-term care insurance.
Another type of hybrid insurance is a long-term care annuity, which provides long-term care insurance at a multiple of the initial investment amount. The investment grows tax-free at a fixed rate of return, and, if used for long-term care expenses, gains will be received income tax-free. If you qualify for long-term care benefits, the long-term care coverage would draw down both the account value and the long-term care pool. Once your account value has been exhausted, the insurer would provide the remaining long-term care pool benefits, which is effectively the insurance component of the policy.
Having a plan in place for long-term care allows you to maintain your independence and afford quality care, and it also helps you reduce the financial and psychological stress that a long-term care event can impose on your family. If you have questions or would like to learn more about long-term care options that Catholic United Financial offers, contact your local Sales Representative.