Investing in Long-Term Care Insurance

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Is Long-Term Care Insurance a Good Investment?

We buy insurance to shift the risk of a catastrophic financial loss. We have it for our homes, our cars, and our health. Yet, many people overlook the single greatest financial risk most seniors will face: the cost of long-term care. Investing in a Long-Term Care (LTC) Insurance policy is one of the most powerful ways to protect your family’s financial future, but it’s a decision that requires proactive planning.

The Critical Coverage Gap: What Your Health Insurance and Medicare Don’t Cover

The most dangerous misconception in retirement planning is that health insurance or Medicare will pay for long-term care. They will not. These plans are designed to cover acute medical needs, not the ongoing custodial care that most people require, such as assistance with bathing, dressing, and eating.

Medicare may cover a short stay in a rehabilitation facility after a qualifying hospital stay, but even this comes with a major catch: you must have been formally “admitted” as an inpatient for at least three consecutive days. Days spent under “observation” status do not count, a fine-print detail that leaves many families with devastating, unexpected bills.

The High Cost of Waiting

The likelihood of needing long-term care is high—for a married couple reaching age 65, there is a greater than 75% chance that at least one spouse will require significant care. The cost of this care can easily deplete a retirement nest egg by hundreds of thousands of dollars. Unfortunately, many people don’t consider LTC insurance until they are in their late 50s or 60s, when the premiums have become prohibitively expensive.

Furthermore, LTC insurance companies can deny coverage for pre-existing health conditions. The longer you wait to apply, the higher the probability that a health issue could make you uninsurable at any price. The ideal time to purchase LTC insurance is typically in your late 40s or early 50s, when you are still healthy and premiums are much more affordable.

What to Look for in a Policy

Unlike standard insurance, LTC policies vary widely. It is crucial to work with a knowledgeable professional to compare the key features:

  • Inflation Protection: A policy without an inflation rider will have its value eroded over time.
  • Elimination Period: This is the waiting period before benefits begin. A 90-day period is common.
  • Benefit Amount: This is the daily or monthly payout. Ensure it is adequate to cover the costs in your area.
  • Scope of Coverage: A good policy will cover all levels of care, including in-home care, assisted living, and skilled nursing.

Integrating Insurance into Your Plan

For most middle-class families, self-insuring against a long-term care crisis is not a viable option. LTC insurance is a powerful tool, but it’s just one piece of the puzzle. It should be integrated into a comprehensive plan to protect your assets, which may also include strategies for accessing programs like Medicaid or VA benefits if needed.

Call our office at (919) 256-7000 to schedule a consultation.