LTC.docx

Long-term care insurance can help you spend your golden years in comfort without going broke According to the US Department of Health and Human Services, the typical person who turned 65 in 2020 has about a 70% chance of needing some sort of long-term care or assistance during their older years. And...

Long-term care insurance can help you spend your golden years in comfort without going broke According to the US Department of Health and Human Services, the typical person who turned 65 in 2020 has about a 70% chance of needing some sort of long-term care or assistance during their older years. And the costs of this type of care are high — the average person needing care at home will spend about $54,000 per year or $4,500 per month, and a person who needs a room in a care facility will pay an average of about $96,000 per year or $8,000 per month according to 2022 data from HCG Secure. With costs so high, paying for long-term care can quickly drain your savings and limit your options for higher-quality care. Long-term care insurance can play an important role in ensuring you or a loved one spends the last chapters of life in comfort, but you need to know the ins and outs of this product before deciding if it's right for you. What is long-term care insurance? Long-term care insurance can help you cover the expenses associated with getting skilled care for an extended amount of time for chronic health conditions. "What long-term care insurance does is it provides more day-to-day things," says Peggy Haslach, a certified financial planner at Finity Group. It's separate from health insurance, including Medicare, which generally doesn't cover these costs. While Medicaid can cover the costs, not all facilities accept Medicaid payments. You don't have to move to a facility to gain the benefit of long-term care insurance — it can also cover the cost of care at home, including training for family members and in-home assistance. Long-term care insurance may also cover home modifications that make your living space more accessible and comfortable, such as ramps and shower handles. How does long-term care insurance work? Long-term care insurance kicks in when you're experiencing difficulty living life on your own. Generally, insurance companies classify this according to the six activities of daily living, or ADLs: Bathing Continence Dressing Eating Transferring (getting from a bed to a chair) Toileting When someone loses two of these six ADLs, they may be able to trigger their long-term care insurance benefits. In addition, certain cognitive issues associated with Alzheimer's and dementia can automatically put your policy's benefits into effect (though this usually requires a doctor's evaluation). After the benefits are triggered, you'll still spend a certain amount of time (called the elimination period) paying out of pocket. The elimination period varies from policy to policy but is usually either 30, 60, or 90 days. After that period, your insurance will cover the rest of the costs up to a daily limit. However, many policies have lifetime maximums on how long they will pay out — generally, two to four years of care, though unlimited policies do exist. If there's a limit on your policy and you exceed it, you'll need to dip back into your savings to cover costs. A high-yield savings account, such as UFB Premier Savings or Marcus by Goldman Sachs High Yield Online Savings, lets you keep money earmarked for long-term care in a safe, insured deposit account that still earns a decent amount of interest. What are long-term care insurance costs based on? Several factors go into how much you'll pay for the policy, including: The age you are when you buy the policy Your gender The maximum amount it will pay per day The number of years a policy will pay for The lifetime maximum amount of the policy Any additional benefits you include It's worth noting that women do tend to pay more for a policy. Haslach notes that women tend to live longer than men on average and usually retire with fewer assets. How do you get long-term care insurance? Long-term care insurance can be purchased in several different ways. One way to get long-term care insurance is through additional coverage — known as a rider — on your life insurance policy. These policies let you use some of the death benefit (the amount that would go to your family when you die) to cover your long-term care expenses while you're still alive. Several of CNBC Select's top picks for senior life insurance offer long-term care riders, including Mutual of Omaha, which has these riders available to people up to age 79. Another top pick, Guardian, also offers long-term care insurance riders on certain life insurance policies. Traditional, standalone long-term care insurance is also available, though it's becoming more rare. These policies aren't tied to life insurance or annuities and are purchased separately. Finally, it's possible to get hybrid long-term care policies, which have long-term care benefits on top of a life insurance policy or annuity. Do I need long-term care insurance? As with any insurance product, you need to have a clear idea of your wants, needs and finances to make an informed decision. Before taking out a long-term care policy (or adding a rider to your life insurance policy), make sure you have a good idea of how much coverage you need for care. Then consider other places where you have money that could be used for these expenses later on. Assets such as retirement savings, non-retirement savings and investments, annuities, life insurance, and your home are all options to get cash that could cover this type of assistance. Haslach also recommends talking to an expert to see if long-term care insurance fits your situation. "Find somebody who understands all the options — annuities, life insurance, long-term care insurance, and your investments," she says. Bottom line Long-term care costs can devastate your savings, but the need for long-term care insurance is a highly individual consideration and should consider your assets, family structure, and personal needs. If you decide it is for you, it's possible to get it through your current life insurance, a hybrid policy, or in some cases, a standalone long-term care insurance policy.