The National Council on Aging tells us that about 70% of seniors who are 65 years old right now will eventually need long-term care, whether that’s assisted living, memory care, or skilled nursing. Currently, more than 800,000 Americans reside in assisted living. There are multiple ways to pay for assisted living, including personal savings, assets such as retirement funds, annuities or stocks, family member contributions, pensions, or Social Security benefits.

Long-term care insurance can also provide valuable peace of mind for seniors and families navigating senior living costs.

WHY CONSIDER LONG-TERM CARE INSURANCE

Health insurance covers medical expenses such as visiting the doctor, treatments, procedures and medications. Medicare and Medicaid are health insurance programs, but neither pays for assisted living room and board. However, they do cover some types of in-home care performed for residents by outside providers.

Long-term care insurance offers additional financial assistance for senior living. It helps fill in the gaps to pay for:

• Personal care services (typically activities of daily living, also known as ADLs, such as bathing, dressing, or assistance toileting)
• Home health care (skilled nursing and personal care services performed in your home)
• Memory care (provided you or your loved one are diagnosed with dementia after purchasing your policy)
• Ongoing skilled nursing care

There are two types of long-term care coverage:

• Traditional policies offer comprehensive long-term care coverage. While premiums are not refundable if you don't end up needing care, this type of policy provides focused protection and can offer significant peace of mind.
  
  
• Hybrid policies offer flexible long-term care solutions. These policies combine long-term care coverage with financial benefits, such as a death benefit or the potential return of premiums. This option allows you to leverage your investment for both future care needs and other financial goals.

KEY FACTORS TO CONSIDER

Should you purchase long-term care insurance? That depends on your age, health status, family medical history, finances, and availability of other resources to help pay your senior living costs. Policies differ in important ways, so you’ll want to review options carefully.

Coverage

Most long-term care policies cover assisted living residents, but not all. Be sure to check for this, along with details that describe what is covered by the policy and what is not covered. Is there a daily limit, or maximum lifetime benefit?

Note that these policies cover a finite time period, usually two to five years. According to the National Council on Aging, women who need long-term care typically need it for an average of 3.7 years. For men, the average is 2.2 years.

Limitations

Most policies have a 30- to 90-day waiting period, during which you will still have to cover your own costs. After that, it’s still up to you to pay, and your insurance provider will reimburse you. This is different from regular health insurance, which is billed directly to the provider first.

Cost

Most people obtain long-term care insurance in their 50s or 60s. The younger you are and the better your health, the lower the premiums. But you can still get this coverage even if you’re older. Look for a policy with inflation protection. Talk with a financial advisor about potential tax advantages that might apply to you. 

IT’S A PERSONAL DECISION

Choosing whether or not to invest in long-term care insurance is a personal decision that depends on your individual circumstances, financial situation, and preferences. Factors like your health, family history, and desired level of coverage all play a role in determining if this type of insurance aligns with your needs. Speaking with a financial advisor can be a helpful step in evaluating your options and making an informed decision about how to best prepare for your future care needs.