How much does long-term care insurance cost?
- You should consider a long-term care insurance plan while you are still young and able to purchase it.
- Long-term care insurance costs can be managed by adjusting your daily benefit levels.
- Costs vary by location, so it’s best to get local estimates and determine what benefits you may need.
- New hybrid insurance products can help you or your family benefit from the policy regardless of whether you use the long-term care coverage or not.
Long-term care insurance can be a crucial piece of your financial plan. Here are answers to five common questions you may have when shopping for long-term care insurance.
Long-term care insurance questions
How much will coverage cost?
In 2017, a couple in their 60s paid between $100 and $150 a month each for long-term care insurance, according to the American Association for Long-Term Care Insurance.1 But, over the long term, not covering the risk may end up costing so much more. Some experts recommend that most people pay up to five percent of their income for long-term care coverage. You may find you need to adjust the length of coverage or the daily payment in your policy to make the purchase more affordable. And, you may also want to consider a policy that provides automatic cost-of-living increases to protect against inflation.
Why should I buy long-term care insurance?
Seventy percent of people turning age 65 will need long-term care services sometime in their lives, according to the U.S. Department of Health and Human Services. Even if you have done a good job saving for retirement so far, you need to prepare for unexpected events that can derail your future, and the need for long-term care may be one of the costliest of those events. For example, if you need to move to a nursing home, the median cost per year for a private room is more than $97,000 per year.2 Medicare may cover some extended care costs but only under certain limited conditions.
Cost breakdown of long-term care options
If you or a loved one needs more hands-on care, you have choices, including assisted living or home health care. Here’s what you can expect.
When should I buy it?
It’s best to purchase long-term care insurance while you are still healthy and able to purchase it. Often as you age you can develop conditions that may make coverage more expensive, or worse yet you may not be able to qualify at all.
How much coverage will I need?
Long-term care prices can vary from state to state, so you may want to look into nursing home and assisted living costs in your area so you can make an accurate estimate of how much coverage you may need. Women typically need care longer than men, averaging 3.7 years compared to 2.2 years, respectively, according to longtermcare.gov. Here is a link to check out costs in your state.
Another important choice is how much you may need in daily benefits. Even if the average cost of care is more than $200 a day, a lower daily benefit can still go a long way toward paying for much-needed home health care, aides and housekeepers. For instance, a two-year benefit period at $100 per day is a $73,000 pool of money. That can buy you time to make other decisions.
What if I buy it and don’t end up needing it?
If you are concerned about spending money on long-term care insurance that you’ll never use, you may want to consider some of the hybrid products available. Many life insurance policies now offer a long-term care benefit rider that allows the policyholder to use a portion of the death benefit for long-term care. There are also life and long-term care hybrid insurance policies that pay a death benefit if the policyholder never needs long-term care. Both options mean that you or your beneficiary may benefit from the policy no matter how your circumstances unfold.
Pros and cons of your long-term care insurance options
|Stand alone long-term care||Life insurance with a long-term care benefit rider||Hybrid of life insurance and long-term care|
Sole purpose is long-term care protection
Flexible policy design for affordability
Combines life insurance and long-term care in one policy
Death benefit goes to your beneficiary
Cost of long-term care coverage may be guaranteed never to increase
May have money back guarantee. All guarantees are based by the claims-paying ability of the issuing company.
Rates can increaseWon’t get your
money back if you don’t use the insurance
Long-term care benefits may be more limited than with stand alone policy
Death benefit may be lower than with life insurance with a long-term care benefit rider
Ask your advisor to help you determine which strategy may be right for you.