Long-term Care Planning - A Growing Need

The need for long-term care planning grows more and more pressing each year. The combination of people living longer and costs of such care rising rapidly have contributed to the growing need. Here are some bare facts:

  • A healthy 65-year-old has at least a 40% chance of living into his or her 90s, according to AgeLab, a research program within MIT’s School of Engineering that works with business, government and NGOs to improve the quality of life of older people. And six in 10 men and eight in 10 women will need chronic care
  • According to Genworth’s 2015 Cost of Care Study, a private room in a nursing home facility costs a median of $250 a day, or $91,250 a year, up 4.17% from 2014. In big metropolitan areas, the cost is much higher, with nursing homes in New York going for $182,500 per year. The cost of adult daycare has also risen sharply. Adult daycare providers charge a median of $69 a day, or $25,185 a year, a steep 5.94% increase from 2014
  • The two groups who most need long-term care insurance are couples and single women. For couples, the first to get ill usually is cared for by the healthier spouse. If the illness eats up the couple's assets, the survivor could be left with nothing. Single women receive two-thirds of all the long-term care benefits, and they have to pay more for long-term care insurance

Spurred by the statistics, long-term care and the insurance products created for it are a very hot current topic. Like anything when it comes to insurance, whether to take the risk on yourself or transfer that risk by buying a policy comes down to an individual choice. Long-term care may be becoming less of a low probability event, and it definitely has a high cost associated with it. The key is to do the analysis so you can at least explore your options.

If you do consider a long-term care policy, here are nine things to keep in mind, provided from US News:

Investigate the best option for you. Talk to a specialist in long-term care to determine what options fit your circumstances, plus talk to a fee-only financial planner about where long-term care insurance fits into your retirement plan.

Compare policies and read all the fine print. How long is the exclusion period before the policy begins paying benefits? What capacities must you lose? How many years of care are covered? While you should investigate these policies yourself, the situation is complex enough that you should consult an expert who doesn't sell policies to help make a decision.

Investigate the companies. Many companies have left the market in recent years. As such, if you're going to look at long-term care policies, you want to make sure you look at the health of the companies you're buying them from.

Don't insist on a Cadillac if you can't afford one. One way to cut the cost of long-term care insurance is to choose a policy that covers fewer years or pays out less per day. Eliminating the inflation rider can also cut the cost. While historically people have recommended trying to fund first-class care, some coverage is always better than no coverage.

Don't stop paying premiums. If you don't think you can keep up with the premiums on your policy your entire life, you shouldn't buy one. Once you quit paying, your policy is no longer in force, and everything you've paid will be lost. Make sure the insurance company has a person to notify if premium payments stop. Many families have found out the hard way that when mom or dad developed dementia, he or she quit paying premiums, and the policy lapsed.

Don't keep your long-term care plans a secret. Make photocopies of the first two pages and give them to someone who is going to be responsible. You may also need someone to advocate for you when it comes time to use the policy or file a claim, so authorize someone to speak to the company on your behalf in advance.

Apply earlier rather than later. If you're not healthy, you can't buy a policy, so the best time to apply is before you develop health problems, usually before 65. An AALTCI survey found that insurers rejected 44 percent of applicants ages 70 to 79, 25 percent of those 60 to 69, 17 percent of those 50 to 59 and 12 percent of those under 50.

Investigate policies for couples. Couples have the option of buying shared benefit policies. Each person would sign up for a two-year plan, for example, but one spouse can use all four years if needed.

Review your long-term care plans every year. While you probably won't want to change your entire policy, you may have options to change coverage. Or, if you elect not to buy a long-term care policy, revisit that decision periodically. New products may emerge.