Should Your Safety Net Include Long-Term Care Insurance?

You’re 100% committed to protecting your family. So you make sure that you’ve secured health insurance, life insurance and disability insurance. But are you missing a critical element of your financial safety net?

I’m talking about long-term care insurance. In this month’s Protect Yourself, we’re going to discuss what this often-overlooked coverage is and how not having it could derail your journey to Financial Freedom.

You Probably Need Long-Term Care Insurance

long-term care insuranceAccording to recent studies conducted by Morningstar, more than half of people turning 65 are expected to have a long-term care (LTC) need during their lifetimes. The average length of stay in a nursing home is right around a full year. And that’s an astoundingly expensive year.

Do you think health insurance, disability insurance, veteran’s benefits, Social Security, Medicare, Medicaid or a government service will cover those LTC needs at a safe level? Think again. Non-LTC insurance policies simply don’t cover long-term care.


Meanwhile, Medicare and Medicaid cover only a few weeks of care for very specific circumstances like rehabilitative care in a nursing home. And your options for where you receive your care and limited. So, if you require time in an assisted living facility, want some in-home help or have a chronic illness like Alzheimer’s Disease, you’re out of luck. Plus, the coverage you do get through Medicaid is available only if you have next to nothing in assets.

Feeling fine about spending down all your assets until you’re able to receive some government-sponsored care? Watch out. Many jurisdictions have filial responsibility laws that can be used to force adult children to pay for the care of their destitute parents. So, in addition to running your own finances into the ground with your LTC expenses, you could seriously disrupt your kids’ financial stability as well.

All these scenarios are more than a little scary. If you’re working toward a Financially Secure future, paying out-of-pocket costs for your long-term care could derail your goals completely. That’s why it’s so important to consider the purchase of LTC insurance as you transition into your 50s.

So What Is Long-Term Care Insurance?

long-term care insuranceFundamentally, long-term care insurance (or LTC insurance) is a unique insurance product that covers specific elder care services. These services typically include a combination of the following:

  • Adult day care;
  • Home health care;
  • Assisted living;
  • Nursing home care;
  • Home modifications (ramps, accessibility upgrades and more); and
  • Other services.

Over the course of your lifetime, these services can be extraordinarily expensive. That’s why most people should have an LTC policy in place. Of course, there are some cases in which you can reasonably delay or skip the purchase of long-term care insurance entirely. Some of these reasons are:

  • You’re younger than 55 years old. If so, you can typically wait until that age to make your purchase.
  • Despite sound financial planning and responsible use of your money, you truly can not afford the premiums for LTC coverage. Then you should delay your purchase until you can afford it.
  • If you’re financially stable enough to self-insure–that is, to cover your own potential care costs–you don’t need to buy LTC coverage.

How Do You Choose The Right LTC Policy?

While you can pick up a term life insurance policy for a few hundred dollars a year, long-term care insurance is decidedly not cheap. (The cost is one of the main reasons many people avoid buying this type of insurance.) Policies generally start in excess of $1000 a year and go up quickly depending on your age and health at the time you purchase. But you can feel confident in your choice of policy–and afford it–if you follow these steps:

  1. Plan for your purchase. If you know you intend to pick up a policy–whether that’s in five or 25 years–plan now to ensure the money is available for the annual premiums when you need it.
  2. Look at all your options. You may be able to get quality LTC insurance through your employer, a club membership or a trusted financial advisor.
  3. Decide on the type of policy you want. Read the fine print around elimination periods, coverage limits, services insured and more. Also, decide whether you should apply for an individual or joint policy you share with your spouse, partner or related adult.

Too many people enter their golden years simply hoping they won’t require long-term care–an outcome that is unlikely. If you want to protect your spouse, children and assets from a major financial burden, look into a long-term care policy. Incorporating LTC coverage into your safety net could make all the difference in your journey to Financial Freedom.

Community Question: Is something holding you back from investing in LTC coverage? Or have you taken steps to get a policy? Share your experience in the Financial Foundations community!


image credit: Bigstock/Yastremska


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