As we age our chance of needing long term care (LTC) increases. You need LTC when you require help doing your activities of daily living (ADLs). Examples of ADLs are dressing, toileting, eating, transferring from bed to chair and continence.
When the amount of help you need increases so that it’s burdensome to your family, a nursing home may be the only reasonable alternative. But annual nursing home bills can range from $70,000 to more than $90,000 depending on where you live.
If you’re approaching or beginning your retirement in good health, you’ll need to take stock of how to handle your LTC costs when or if they occur.
There are several options you can use to pay them. You can pay with your own money, but that might undermine your estate or completely wipe you out. Medicare isn’t geared to cover LTC but Medicaid is. However you’ll need to spend down your assets and have a low income to qualify. And this has to be done 5 years before seeking Medicaid assistance because of its 60 months ‘look back’ provision on your assets. Lastly you can buy Long Term Care insurance.
LTC insurance policies come in Comprehensive or Facilities-Only versions. Comprehensive coverage may pick up LTC costs administered at home, an assisted living facility, an adult day care center, a hospice facility or a nursing home. The Facilities-Only option is restricted to LTC care in a facility such as a nursing home.
LTC insurance policies offer a range of benefit options. Generally, premium costs increase with more care location options, so Facilities-Only options may be the less expensive choice.
Additionally, premiums costs will decrease the earlier you purchase the insurance. And they depend on how long your LTC care duration will be – for as long as you live or for a shorter duration choice. The daily benefit – how much the policy will pay for each day – also affects your premium as will any built-in inflation adjustment of this.
A possible option to consider is a 3 year duration policy since – statistically – most people are not in a nursing home for more than 3 years. To determine what daily benefit you need, consider where your nursing home will be since some states are more expensive than others. Be sure to include an inflation adjustment. This is crucial to 65 year olds or younger since daily costs may rise significantly over 10 or 20 years – and you may not need your LTC for many years.
Perhaps a short, fat policy – a 3 year provision, and an adequate but inflation-adjusted daily benefit – rather than a life time duration with a lower daily benefit may be suitable for you.