Individuals who require long-term care are generally not sick in the traditional sense but are unable to perform two of the six activities of daily living (ADLs) such as dressing, bathing, eating, toileting, continence, transferring (getting in and out of a bed or chair), and walking.
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Most policies will reimburse you for care given in a variety of places, such as:
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Your home.
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A nursing home.
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An assisted living facility.
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An adult day care center.
Long-term care costs is an important part of any long-range financial plan, especially in your 50s and beyond. Waiting until you need care to buy coverage isn’t an option. You won’t qualify for long-term care insurance if you already have a debilitating condition, and long-term care insurance carriers won’t approve most applicants over the age of 75. The majority of people with long-term care insurance buy it in their mid-50s to mid-60s.
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Why plan for long-term care?
Nearly 70% of 65-year-old people will need long-term care services or support, according to 2020 data from the U.S. Department of Health and Human Services. Women typically need care for an average of 3.7 years, while men require it for 2.2 years. Although some people will get by with unpaid care from family members and others, nearly half will need some paid assistance.
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The costs of care are highly variable, depending on how long you require it, where you live and how intense your needs are.
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If you don’t have insurance to cover long-term care, you’ll have to pay for it yourself in most states. You can get help through Medicaid, the federal and state health insurance program for those with low incomes, but only after you’ve exhausted most of your savings and other assets beyond your primary home and vehicle.
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That prospect leads many people to think about how they can plan for long-term care expenses in a way that protects their retirement savings and lets them get the kind of care they want. And that’s where long-term care insurance comes in, though it’s not the only solution.
ANNUAL MERIDIAN COSTS OF LONG TERM CARE IN 2020
Home health aide
Homemaker services
Adult day day care
Assisted living facility
Nursing home care
$54,912
$53,772
$19,236
$51,600 for a private one-bedroom
$93,072 for a semiprivate room
$105,852 for a private room
Source: Genworth 2020 Cost of Care Survey
People buy long-term care insurance for two reasons:
To protect savings. Long-term care costs can deplete a retirement nest egg quickly. The median cost of care in a semiprivate nursing home room is $93,072 a year, according to Genworth’s 2020 Cost of Care Survey
To give you more choices for care. The more money you can spend, the better the quality of care you can get. If you have to rely on Medicaid, your choices will be limited to the nursing homes that accept payments from the government program. Medicaid doesn’t pay for assisted living in many states.