Long-term care insurance pros and cons

At the start of 2022, you may be thinking you’re one year closer to retirement, or… one year closer to the need for long-term care. Long-term care insurance policies provide coverage to policyholders for those services needed to support daily living: assistance with eating, bathing and dressing. Daily benefits to long-term care policyholders can be used in a variety of settings, including nursing homes, hospice care, a personal residence or adult day care centers. Because most people will need some form of long-term care support in their lifetime, weighing the pros and cons of long-term care insurance can help you determine if purchasing it is the right choice for you.  

Pros of long-term care insurance

What will tomorrow bring? None of us know for sure, but insurance can bring peace of mind to policyholders as it provides some assurance of being secured against unforeseen life events that have yet to occur. Public programs, like Medicare and Medicaid, only provide coverage to those individuals and life events that meet certain qualifications. For example, Medicare doesn’t cover non-skilled assistance with daily living activities, like bathing. Medicare does pay for long-term care for skilled services or rehabilitative services if provided in a nursing home setting, and only for a maximum of 100 days. 

Medicaid, on the other hand, does pay for a good portion of long-term care services. However, income must fall below a certain level, and an individual must meet minimum state income level requirements to qualify. So, to lessen the financial burden on family members or yourself, long-term care insurance can provide help when it is needed to meet essential daily living activities in a number of settings. Also, long-term care insurance can lessen the financial burden that could otherwise deplete retirement savings. According to the National Care Planning Council, the average stay in a nursing home is 835 days. So even a small policy can lessen the financial burden in the event of a short hospital stay, or to cover a few hours a day with an in-home health aide.      

Cons of long-term care insurance

Many individual long-term care insurance policies require medical underwriting, so coverage may not be an option for someone in poor health or one who is already receiving long-term care services. Additionally, some long-term care insurance policies have limits on how long or how much will be paid. The older you are, and the more health concerns you have, the more a long-term care policy can cost you. 

Because women have longer life expectancies than men, with a greater chance of an insurance claim, women generally pay more for coverage than men. Long-term care insurance policies contain an elimination period (30, 60 or 90 days) which represents the number of days you pay for care before the policy starts to pay out. And, as with other types of insurance, there’s always the chance that you may not require long-term care or use the policy at all. 

Research and compare

Careful consideration of your personal financial situation and potential long-term health needs are essential when deciding whether long-term care insurance is necessary. Because long-term care insurance policies are non-standardized, there is flexibility in designing a policy specific to your unique circumstances. However, it may be difficult to compare policies across insurers on price alone. Rather, policies should be compared based on factors such as the amount of money provided in benefits, the deductible period, inflation adjustments and the degree of medical underwriting required. 

Are you puzzling through retirement finances and related considerations? The Alpine Bank Wealth Management team may be able to help. 

Products of our Wealth Management service are not FDIC insured, may lose value and are not bank guaranteed.

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