Do I Need Long Term Care Insurance?
Independence, control over care choices, and protecting retirement assets are some of the benefits of owning long term care insurance.
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People consider buying Long Term Care Insurance for a variety of reasons. For some, their main concern is preserving their assets and retirement income. For some, it is to not become dependent on their family to take care of them. For others, it’s about their independence and freedom, knowing they have control over where and from whom they receive care when they need it, and over the quality level of the care.
Long Term Care Insurance may not be appropriate or necessary for everyone. If you have little in the way of assets and limited income, LTCI may not be appropriate or affordable for you. If you can afford to pay for Long Term Care services directly out of pocket without significantly impacting your assets or income, you may choose to assume the risk yourself (although there are money leveraging policy design strategies that can be advantageous vs. spending your own money). However, for the majority of people who fall in the middle, there are definite advantages to having Long Term Care Insurance.
What is my chance of needing LTC? We all face risk every day in our lives. According to the Georgetown University Long Term Care Financing Project,* for people turning age 65:
The probability of using Nursing Home services in the future:* Your Current Age Males Females 45 23% 49% 65 26% 54% 85 44% 72% * Milliman USA, Milliman, Consulting Actuaries, Long Term Care Guide, July 1, 2002 |
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The need for Long Term Care can actually arise at any age. The U.S. Government Accountability Office estimates that over 40% of people receiving Long Term care services are between the ages of 18 and 64.
How Long Could I Need Care?
The total length of time Long Term Care services are needed can be a combination of the time receiving Home Care and then receiving Nursing Home care.
** National Center for Health Statistics, U.S. Department of Health and Human
Services, June 2002.
*** 2002 Long Term Care Planning Handbook, Federal Handbooks, Inc.
When should I buy?
It is said that you buy Long Term Care Insurance with your money and your good health. As with most kinds of personal insurance, the younger you are when you purchase a policy, the lower the premium. However, possible changes in your health are your greatest risk of waiting. The underwriting process to determine your eligibility for an LTCI policy is more strenuous than for life insurance, which more people are familiar with. When you wait, there is the risk of an unexpected medical condition arising that could make it impossible for you to qualify for a policy. Remember, almost half of people receiving LTC services are under age 65.
Another consideration is that as you wait to purchase at a later date, there is a “double” effect on the premium cost. LTCI premiums are based on your age, so your premium for the same amount of coverage will be greater tomorrow than today. But, the amount of coverage you purchase is typically based on the cost of services at the time you buy. Since the cost of LTC services continues to inflate, not only do you pay a higher premium per benefit dollar based on your older age in the future, but you would need to purchase a higher initial amount of coverage than today.
How Long Could I Need Care?
The total length of time Long Term Care services are needed can be a combination of the time receiving Home Care and then receiving Nursing Home care.
- Home Care: current care-givers have been on the job an average of 4.6 years, with 31% having cared for a loved one for 5 years or longer.*
- The average Nursing Home stay is 2.4 years.**
- While more than half of those that go to a Nursing Home stay less than 90 days, the remaining number of people will stay an average of 2.5 to 3 years.***
** National Center for Health Statistics, U.S. Department of Health and Human
Services, June 2002.
*** 2002 Long Term Care Planning Handbook, Federal Handbooks, Inc.
When should I buy?
It is said that you buy Long Term Care Insurance with your money and your good health. As with most kinds of personal insurance, the younger you are when you purchase a policy, the lower the premium. However, possible changes in your health are your greatest risk of waiting. The underwriting process to determine your eligibility for an LTCI policy is more strenuous than for life insurance, which more people are familiar with. When you wait, there is the risk of an unexpected medical condition arising that could make it impossible for you to qualify for a policy. Remember, almost half of people receiving LTC services are under age 65.
Another consideration is that as you wait to purchase at a later date, there is a “double” effect on the premium cost. LTCI premiums are based on your age, so your premium for the same amount of coverage will be greater tomorrow than today. But, the amount of coverage you purchase is typically based on the cost of services at the time you buy. Since the cost of LTC services continues to inflate, not only do you pay a higher premium per benefit dollar based on your older age in the future, but you would need to purchase a higher initial amount of coverage than today.