Lately, the only consistent aspect of long-term care and long-term care insurance is change. Fifteen years ago, people were able to afford comprehensive long-term care insurance coverage with fairly low premiums, and the process for getting that coverage was pretty quick. Now the number of insurance companies offering long-term care insurance has shrunk, premiums are substantially higher and underwriting is as challenging as ever.
That said, it’s still possible to plan ahead for your long-term care needs, because the goal should not be to just get long-term care insurance, but to create a long-term care plan. Here are some steps to start.
Step 1: Understand what long-term care is and is not. Long-term care is not a place; it’s an event. Long-term care isn’t about going into a nursing home, which is usually why people are reluctant to discuss it or even contemplate it. Just think about this question, “Do you believe the possibility of getting sick and needing care increases with age?” The answer, of course, is, “Yes!”
Step 2: Know what levels of care are available. Most people, if given a choice, would prefer to receive care in their home, or a place that feels more like home, like an assisted living facility. Statistics bear this out. Of people receiving long-term care through their insurance, 49% are at home and 24% are at an assisted-living facility.
Step 3: Learn how much long-term care really costs. The national median rate for a licensed home health aide is $19/hour, which is $3,244 per month for 44 hours of care each week. The national median for a one-bedroom apartment in an assisted living facility is approximately the same. When you compare these figures with the average private room in a nursing home (at $6,660 per month), you can easily see the difference in costs—and why home or assisted-living care is much more desirable, if possible.
Step 4: Look to alternatives. Everyone is different, so every long-term care plan is going to be different. Keep in mind that you are designing a plan, and long-term care insurance is one solution for funding the plan. Today there are more alternatives than there were as recently as five years ago. For example, there are life insurance policies that have long-term care benefits tied to it, or life insurance policies with a long-term care rider. Also, one of the biggest overlooked opportunities is a linked-benefit annuity, which leverages a non-qualified annuity for long-term care. However, these policies and contracts are complex, and so it just makes sense to have an insurance agent or financial advisor walk you through the benefits that they offer, and then help you understand the qualifications you’d need to meet to receive benefits.