Long Term Care - Are you covered?

70% of 65+ year-olds will require some type of Long Term Care (LTC) during their lifetime.  You insure a lot of things in your life because that is a smart financial decision.  Insurance coverage uses discounted dollars (insurance premiums) to protect against large, catastrophic expenses/losses that you couldn’t afford to pay all at once.  You may have auto insurance, homeowner’s insurance, life insurance, and health insurance.  But most people do not have Long Term Care Insurance (LTCI), even though the average cost to stay in a nursing home is over $100,000 per year. And the average nursing home stay ends up costing between $225,000 and $250,000.  That’s a large risk most people don’t have covered.

So, what are your options? 

1. Family Member Care – Count on a family member to provide for your care. Two-thirds of in-home care is provided by friends and family members.
2. Medicaid – A lot of people think that Medicare will cover their LTC costs.  This is a common misconception.  Medicare does NOT cover any type of custodial care and only covers a short-term skilled nursing benefit - up to 100 days.  Medicaid will cover custodial care, but currently you will have to spend down your assets to less than $2,000 to qualify for Medicaid coverage.
3. Self-Fund - Save up enough assets to cover the cost of LTC.  Make sure to plan for inflation on the cost of LTC.  It is estimated to cost 1.5 times of what it costs today in 15 years.  So, that means the average nursing home stay will not be $250,000, it will be $375,000 in 15 years.
4.  Buy a Long Term Care Insurance Policy – There are 2 basic types of coverage, which are:
   1. Traditional LTCI – This will provide a set level of benefit if you cannot do 2 out of 6 Activities of Daily Living (ADL’s).  The larger the benefit you buy, the more expensive the premium.  You can add inflation riders and At-Home Care to these policies.
   2. Asset-based LTC Coverage – These types of plans are usually combination type policies where the LTC coverage is combined with a Life Insurance Policy or is added as a Rider on an annuity.  These work well for those that have accumulated some assets and want to cover this risk but also want to pass on an asset if you didn’t need LTC.

Long term care is not a pleasant topic for most people to discuss, but planning for it can make all the difference for you and your family.  Planning for LTC can give you greater choices; financial security; less burden on your family; and allow you to continue your quality of life.  Everyone’s situation is different, but if you would like to discuss your LTC options, feel free to give us a call at Hovis & Associates.