The most pressing financial concerns of many people tend to revolve around providing for their families, assuring adequate retirement income and preserving their estates for the future. However, few people consider what would happen to their families, themselves and the assets they have worked so hard to accumulate over the years if they were to require long-term care due to a prolonged illness or disability.
Consider the following facts. According to the San Diego Daily Transcript, approximately 70% of all people over 65 will require some form of long-term care during their lifetime. The average annual cost of nursing home care for one person is more than $66,000. Medicare pays for less than 2% of all long-term care cases – including nursing home care, assisted living and custodial care – for a maximum of only 100 days. Medicaid pays for long-term care only after an individual has spent almost his or her entire estate, qualifies as impoverished and is admitted into a nursing home that accepts Medicaid.
Fortunately, there is a solution to assist in paying for these expenses and leaving more of an individual’s estate intact – long-term care insurance. Without long-term care protection, expenses associated with assisting in the activities of daily living can drain – and sometimes even deplete – a person’s entire estate, potentially putting family members into debt.
Many people often think of long-term care as something for “old people,” telling themselves, “We don’t need that now. We’ll consider that later when we’re older and get closer to needing it.”
Unfortunately, this is far from the truth. While certainly appropriate for care of the elderly who require it, long-term care is not something reserved exclusively for older individuals. One third of all 700,000 stroke victims are under 65, and one eighth of all Alzheimer’s patients are diagnosed before the age of 65. In fact, 30% of all those who are receiving home health care, and almost 10% of those receiving nursing home care are pre-retirement age adults, ranging in age from 18 to 64. Their needs were created by accidents, strokes, brain injuries or tumors, mental conditions, AIDS, multiple sclerosis, muscular dystrophy, or even early onset of Alzheimer’s and Parkinson’s diseases.
When younger people need care, it is often truly financially devastating. For example, the average length of stay in a nursing home for a male younger than 59 is 3,840 days – that’s more than 10 years and far longer than the benefits provided by conventional group or individual health insurance, including HMOs.
Moreover, a recent Prudential Research Report showed that 58% of Americans believed that they would never need long-term care – no nursing homes, no assisted living facilities, no adult day care or home care. Yet the facts tell us that almost half of us will spend some time in a nursing home when we are older, while 72% of us will use home healthcare services. Even worse is that 46% of those with health insurance believe that their insurance would cover the majority of the long-term care costs. In other words, long-term care protection is important for everyone. When considering the purchase of this benefit, individuals should keep in mind that the best long-term care policy is one that provides comprehensive benefits – covering all types of care, including at-home or adult day care, or care in an assisted living facility or nursing home. Benefits should be available for the care that is most appropriate for the individual’s long-term needs.
A long-term care policy should be adequate to cover the potential need, considering the daily amount and how long benefits may need to be paid.
As with any type of insurance, the purpose of long-term care protection is to safeguard individuals and their assets against catastrophe. Therefore, while the average length of a stay in a nursing home is only almost two-and-a-half years, when we consider only those nursing home stays that are for chronic conditions – those lasting more than one year – then the average length of the stay is more than six years. That makes a policy with unlimited, lifetime benefits the most desirable.
The policy should also provide protection against inflation. Individuals should think about those benefits that might need to be available in 10, 20 or even 30 years. Perhaps just as important, it is critical to contemplate what the costs could be at that time compared to the costs today.
Give yourself one less thing to worry about by taking steps now to protect your hard-earned assets and your independence in the future.
For more information about making long-term care insurance part of your comprehensive investment plan, consult your financial advisor.