Seeking Protection With Long-term Care Insurance

All of us wish for a long and healthy life. However, the reality for many is that as we grow older, the likelihood of needing medical care for an extended period of time increases. According to the U.S. Department of Health and Human Services, seven out of every 10 individuals over age 65 today will require at least some type of long-term care.

It’s no secret that our bodies tend to become more vulnerable to illness, injury or disease as we age. The government estimates that by 2020, 12 million Americans over age 65 will require long-term care services.

This is one of the biggest financial risks we face in later life. While many of us will no longer have a mortgage payment and typically won’t have to worry about supporting children in our retirement years, healthcare expenses represent one facet of life that typically becomes more costly as we grow older. Services such as nursing home stays and in-home care are not typically covered by a traditional health insurance policy or by Medicare. Will you be in a position to withstand the financial impact of such an expense? One government estimate puts the average annual cost of a nursing home stay at $50,000 in today’s dollars, and the cost is almost certain to be higher in the future.

Planning ahead with long-term care coverage

More Americans are turning to long-term care insurance policies as a way to help prepare for what could be excessive costs of care in the years to come. This type of policy can be purchased on an individual basis, but you may be able to obtain coverage through your employer as well.

Most people age 18 or older, often up to age 85, are eligible to purchase this coverage. The cost is based on age and a number of health-related factors. There are certain situations involving pre-existing conditions where coverage is not available. However, it is an investment worth considering as a way to protect your long-term financial security.

What long-term care coverage provides

You probably won’t find a policy that will insure all expenses you may incur with a nursing home stay or other form of long-term care, but the right policy can help offset a significant portion of the costs.

When you purchase a policy, you usually have the flexibility to define the level of benefits you receive. The greater the benefits, the more costly the coverage will be, but the better the protection you’ll enjoy. Policies often offer a daily benefit amount for care, ranging from $50 to $500 per day. You will also choose a Maximum Lifetime Benefit. Considering that it could be decades before you might actually rely on the benefits of the policy, you may want to consider including an inflation adjustment as part of the coverage. This means that benefits paid in the future will provide comparable coverage, based on future costs, of what you would receive today.

You can specify coverage only for a situation where you are treated in a facility such as a nursing home. Other policies offer comprehensive coverage that will provide benefits regardless of where the care takes place.

One way to reduce the cost of long-term care insurance is to extend what is called the ‘elimination period.’ This represents a number of days from the start of care services before insurance coverage kicks in to help pay the costs. The elimination period can range from zero days (coverage starts immediately) to 180 days. The longer the elimination period, the less expensive the policy will be, but it will mean you face larger out-of-pocket expenses at the time you receive care.

It may be unsettling to plan for a day when you may need significant medical care, but if that day should ever arrive, consider the relief you’ll experience knowing that you’ve taken steps to protect your financial security.

AJ Jugan and Brian Stumpf are financial advisors and Certified Financial Planner™ professionals. Andrew (AJ) can be reached by calling 412-635-5813 or emailing andrew.m.jugan@ampf.com. Brian can be reached by calling 724-799-2782 or emailing brian.d.stumpf@ampf.com.