The Growing Need for Long-Term Care Insurance

11/08/2022 Written by: Jenny Boudreau

In 2021, $12.3 billion in long-term care claims were paid, according to the American Association for Long-Term Care Insurance[i]. This figure represents the highest benefit payout of any insurance policy type over a one-year period.

Long-term care can include a range of services and support to assist with personal care needs, generally referred to as activities of daily living (ADL), and includes bathing, dressing, and eating. According to data from the U.S. Department of Health and Human Services, most Americans age 65 or older will need long-term care services at some point in their lives[ii]:

  • The likelihood of needing long-term care increases as people get older.
  • Women outlive men by an average of five years, which makes it more likely women will live alone when they are older.
  • An accident or chronic illness that causes a disability may also require long-term care.
  • On average, 8% of people between the ages of 40 and 50 have a disability that could require long-term care.
  • 69% of people age 90 or more have a disability.
  • Chronic health conditions, family health history, and poor diet and exercise may also increase the likelihood that long-term care services may be needed.

When thinking about your future health care needs, it’s essential to consider the need for care that covers various custodial (unskilled or semi-skilled) types of care. But if long-term care conjures up thoughts of nursing homes, you may be surprised to learn there are many options available:

  • Home health care
  • Community-based care
  • Assisted living facilities
  • Adult day care
  • Respite care
  • Hospice care

The need for long-term care can arise when you least expect it, and planning for it ahead of time is a smart money move. A first step can be to familiarize yourself with the available long-term care options and review your financial plan to determine how to pay for different options of long-term care, should you need it.

Generally speaking, the cost of care varies by the level of care required, geographic location, and location of care. Understanding the median cost based on these variables can help with the development of your financial plan. According to Genworth's Cost of Care Survey, the 2021 median monthly costs for certain components of long-term care were[iii]:

  • In-Home Care
    • Homemaker Services: $4,957
    • Home Health Aide: $5,148
  • Community and Assisted Living
    • Adult Day Health Care: $1,690
    • Assisted Living Facility: $4,500
  • Nursing Home Care
    • Semi-Private Room: $7,908
    • Private Room: $9,034

How you pay for long-term care depends on your financial situation. Medicare and Medicaid provide some long-term care benefits, and it’s crucial to understand the terms of this coverage as well as whether you qualify. With this information, you can better determine the additional services you may need and better project the needed funds to cover the expense. Personal funds, including savings, retirement funds, or cash from the sale of a home, are commonly used to cover long-term care expenses. As your care needs increase, personal funds may not be enough. This is where insurance can be helpful, with options that include a traditional long-term care policy, a hybrid policy combining long-term care with life insurance or an annuity, or life insurance with a long-term care rider.

When choosing a long-term care insurance policy, ask yourself:

  • What type of insurance coverage is most important?
  • How do I prefer to pay the premiums?
  • Do I want the option to lock in my premium?
  • How is my health?
  • What are the tax advantages?

Most people prefer not to think about the need for long-term care. But where, how, and how much care you receive is integral to navigating life’s financial challenges. Contact an experienced advisor at AssuredPartners Investment Advisors for help understanding your options.

[i] American Association for Long-Term Care Insurance, 2022, www.aaltci.org

[ii] https://acl.gov/ltc/basic-needs/how-much-care-will-you-need

[iii] https://www.genworth.com/aging-and-you/finances/cost-of-care.html

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