A Raleigh NC financial advisor talks about long term care.

Long-term care insurance provides financial coverage for assistance with essential daily living tasks, such as bathing, dressing, eating, and mobility. It is important to note that Medicare, supplemental Medigap policies, and conventional health care insurance do not typically cover this type of care.

Good health and a young age can lead to the belief that long-term care is not a pressing concern. It can be postponed or even ignored. However, it's crucial to consider the following: Individuals who turn 65 today face a 70 percent likelihood of requiring long-term care assistance at some point in their lives.

Additionally, the expenses associated with long-term care can accumulate rapidly. According to the U.S. Department of Health and Human Services, the average monthly cost for a one-bedroom unit in an assisted living facility is $3,628 (equivalent to over $43,000 annually).

What is long-term care insurance?

Medicare covers a range of medical services like doctor's visits, hospital stays, and prescribed medications. In certain cases, it also includes custodial care in a nursing home for recovery from illness or injury. However, Medicare generally provides coverage for up to 100 days or less. Beyond that period, individuals are responsible for their own expenses.

To address expenses not covered by Medicare, long-term care insurance offers coverage for various costs, including:

1.     Skilled nursing care

2.     Occupational, speech, and physical therapy

3.     Nursing homes that offer comprehensive care, including accommodation and meals

4.     Assisted-living facilities or residential care facilities providing living spaces with access to necessary care

5.     Home modifications, such as wheelchair ramps, bathroom renovations, and widened doorways

When choosing a long-term care insurance policy, it is important to consider the limits of the coverage. These limits dictate how long the policy will be in effect. Some policies may cover care for two to five years, while others may provide coverage for the entirety of one's life.

How to choose a long-term care policy.

Finding the ideal policy requires consideration of individual needs as there is no universal solution. Each policy caters to specific types of care, so if you have a clear idea of the care you'll require, such as services related to a chronic illness, it's crucial to select a policy that covers those needs. In cases where your future care requirements are uncertain, opting for a policy with built-in flexibility is advisable.

Some policies offer coverage for adult care. This care includes medical assistance and social engagement during the day. This helps to reduce the burden on caregivers.

Certain plans require the use of services from certified home-care agencies or licensed professionals. Others offer the option of hiring independent care providers.

Choosing the right policy involves a delicate balance. Avoid purchasing an expensive policy with benefits that may go unused. Conversely, it's important to avoid insufficient insurance coverage. One valuable point to consider is that while you can often decrease your coverage, it becomes more challenging to increase it as you age and your health declines.

How to buy long-term care insurance.

If you're currently employed, it is worth considering purchasing a long-term care plan offered by your employer before you retire. Often, these plans are available at a discounted rate. Once you retire, you can usually retain the policy as long as you continue paying the premiums.

Alternatively, you can acquire a policy through an insurance agent or broker. It is essential to make sure staff have been trained in long-term care insurance. They must also have the required license to sell insurance in your state.

Contact your state insurance department. Request a list of companies approved to sell long-term care insurance policies in your area.

When to buy long-term care insurance.

Determining the right time to purchase long-term care insurance is crucial. Unlike health care policies, providers of long-term care insurance can decline coverage based on pre-existing medical conditions. Waiting until you are older and in less stable health to shop for coverage may limit your options.

It is advisable to purchase a policy a few years before retirement. This is because premiums are generally lower when you are younger. Waiting until care becomes necessary is not recommended.

Pros and Cons of long-term care insurance.

As with most purchases, there ae pros and cons to buying long-term care insurance.

Pros

• It can protect your assets if you need long-term care in the future. This shields your personal savings. Expenses related to long-term care have risen significantly in recent years. This trend is expected to continue. This is similar to the pattern seen in other healthcare services.

• Many options to fit your needs and budget-Long-term care policies come with various options for structuring coverage. Additional benefits are often available at an extra cost. For couples, joint coverage can be purchased to provide protection for both individuals. Certain policies include inflation features that adjust the coverage amount annually. Insurers typically allow policyholders to select the duration of benefits and a maximum daily amount.

• Premiums potentially tax deductible- Premiums you pay on a long-term care insurance policy can qualify as a deductible medical expense. To deduct your premiums from your federal income taxes, the policy must be tax-qualified, which most policies are. Your insurer can confirm if your policy is tax-qualified. You itemize your deductions. Your medical expenses must exceed 7.5 percent of your adjusted gross income, and you can only deduct expenses that exceed that amount.

• Coverage can never expire-Long-term care policies are guaranteed for as long as you pay the premiums, regardless of your age or health condition.

Cons

• It can be expensive-Insurers have provided data indicating that a 55-year-old single male would typically spend around $1,700 per year on premiums. By the time he reaches the age of 65, the total benefit would amount to $164,000. This benefit increases by 3 percent annually and could reach $386,500 by the age of 85 if the policy remains unused. For women, the annual premium for the same benefits was $2,675. 

• Premiums can increase after you buy your policy-One of the significant downsides of purchasing long-term care coverage is the potential for premium increases. Insurance companies have the authority to raise premiums. This power is granted through approval from state insurance departments. The premiums are increased for a group of policies, rather than targeting individual policyholders. This means that, after five or ten years of owning the policy, you might encounter premium hikes ranging from 5 percent to 25 percent.

• As people live longer and healthier lives, it is important to consider that some may not need long-term care benefits. Not everyone will require these benefits as they grow older, as some can continue to independently carry out daily functions. The cost of long-term care coverage can be high. It may never even be used. This can be a significant expense for some.

Bottom Line

Long-term care insurance may not seem like an immediate concern if you are healthy. However, preparing for it now can help you avoid financial issues in the future. Moreover, having the assurance that your care needs will be met as you age can bring you peace of mind. Your financial advisor or financial planner can help you to decide if long-term care is right for you.

Sources:

https://www.meetbreeze.com/long-term-care-insurance/pros-and-cons-of-long-term-care-insurance/

https://www.medicare.gov/coverage/skilled-nursing-facility-snf-care

https://acl.gov/ltc/basic-needs/how-much-care-will-you-need

Disclosures:

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This material is provided as a courtesy and for educational purposes only.  Please consult your investment professional, legal or tax advisor for specific information pertaining to your situation.

These are the views of the author, not the named Representative or Advisory Services Network, LLC, and should not be construed as investment advice. Neither the named Representative nor Advisory Services Network, LLC gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Please consult your Financial Advisor for further information.

Life Insurance: Several factors will affect the cost and availability of life insurance, including age, health, and the type and amount of insurance purchased. Life insurance policies have expenses, including mortality and other charges. If a policy is surrendered prematurely, the policyholder also may pay surrender charges and have income tax implications. You should consider determining whether you are insurable before implementing a strategy involving life insurance. Any guarantees associated with a policy are dependent on the ability of the issuing insurance company to continue making claim payments.