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The Cost of Long-Term Care Insurance

November 12, 2021 | 3 min. read

No one pictures themselves in long-term care, but most of us are going to need it.

If investments are the financial planning equivalent of the charismatic lead singer of a band, long-term care insurance is the humble, publicity-shy bass player. Like the bass player, nobody notices long-term care coverage unless it’s missing.

That shouldn’t diminish its importance, though, because the cost of long-term care can quickly and easily drain your assets and lay waste to your otherwise carefully constructed plan. As shocking as it may sound to you if you’ve never been confronted with the cost of long-term care, the median annual price for full-time home health care or residency in an assisted living facility is over $50,000 and the annual cost for residency in a nursing home can exceed $100,000, according to the 2020 Genworth Cost of Care Survey.

The ongoing cost of long-term care is not covered by Medicare. And though Medicaid does cover many of the expenses associated with long-term care, it does so only when all of your other available assets have been exhausted. And it goes without saying that your choice of facilities is severely limited if you are dependent on Medicaid.

Like most forms of insurance, long-term care insurance is easier to obtain and less expensive if you buy it when you’re relatively young and healthy. That doesn’t mean you should rush out and begin exploring long-term care solutions if you’re in your 20s, but if you’re nearing or beyond age 50, it’s not too early to look into it.

Historically, one of the biggest deterrents to purchasing long-term care coverage has been the possibility that it won’t be needed. After all, many people never have to spend time in an assisted living facility or nursing home. But, according to government statistics, there is a roughly 70 percent chance that someone turning 65 today will need some type of long-term care service in their remaining years.

To address the “use it or lose it” concern, you can also consider a hybrid product that combines life insurance or an annuity with a long-term care rider. This type of insurance pays a death benefit to the policy owner’s beneficiary if the long-term care insurance is not used.

It should also be noted that insurance is generally purchased to cover expenses that may not ever occur – like the cost of repairing or replacing a home as a result of storm damage, the cost repairing a car in the event of an accident or the cost of having major surgery. In other words, no one purchases long-term care coverage in the hope that they will be able to use it someday – they purchase it because of their desire to protect their assets for themselves and their heirs in the event that they do require cost prohibitive long-term care services.

If you don’t already have a plan for long-term care in place and you’re age 45-60, talk to one of our Financial Advisors about a solution that makes the most sense for you and your family.

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