Long Term Care Insurance

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Is Long-Term Care Insurance Part of Your Financial Plan?

We buy insurance to shift the risk of a catastrophic financial loss. We have it for our homes, our cars, and our health. But one of the most significant financial risks many families will face—the cost of long-term care—is often overlooked. Long-Term Care (LTC) Insurance is a specific type of coverage designed to help pay for the assistance you may need with daily living activities as you age.

This is not a replacement for health insurance; rather, it’s a crucial tool that steps in when Medicare and supplemental policies have reached their limits.

The Critical Importance of Timing

For most people, the need for long-term care doesn’t become a reality until later in life. Unfortunately, by then, it is often too late to acquire affordable insurance. Waiting until your 60s or 70s to apply for LTC insurance often results in prohibitively high premiums or even a denial of coverage due to pre-existing health conditions.

The “sweet spot” for purchasing affordable LTC insurance is typically in your late 40s to mid-50s. For middle-class families, planning at this stage can make the difference between having an affordable policy and facing the full, staggering cost of care out-of-pocket.

Key Policy Features to Understand

LTC insurance policies are not standardized, and comparing them can be like comparing apples to oranges. When evaluating a policy, it is essential to work with an agent experienced in this specific type of insurance. Here are the key features you need to understand:

  • Inflation Rider: Long-term care costs rise every year. An inflation rider increases your policy’s benefit amount over time to keep pace. A 5% compound inflation rider is ideal, but a 3% rider can be a more affordable option.
  • Elimination (Waiting) Period: This is the period between when you start receiving care and when the policy begins to pay. A 90-day elimination period is a common and reasonable choice for most people.
  • Levels of Care Covered: Does the policy only cover care in a nursing home? Or does it also cover care in an assisted living facility and, most importantly, in your own home? A comprehensive policy should cover all levels of care.
  • Daily/Monthly Benefit: The policy will pay a certain amount per day or month. It’s crucial to consider future costs when selecting this amount, as the cost of care when you need it will be much higher than it is today.

Integrating Insurance with Your Overall Plan

With statistics showing a high probability that at least one spouse in a couple will require long-term care, planning is not an option—it’s a necessity. Long-Term Care Insurance is one powerful tool, but it’s part of a larger conversation about asset protection and how you will pay for care in the future.

To understand all your options for paying for long-term care, including how insurance fits with other strategies like Medicaid planning, our attorneys can help. Call our office at (919) 256-7000 to schedule a consultation.