June 16th marks 2019’s Father’s Day - a national holiday to celebrate fathers and their contributions to their families. These occasions also provide a time of reflection on family and how to better plan for the future in order to protect yourself and your loved ones financially. A part of that planning process should include evaluating your long-term care insurance needs.
What is long-term care and why is it important to plan ahead?
As people age, the need for added support or services to carry out either personal or health related tasks can arise. Long-term care is defined as the medical or non-medical support needed by an individual for an extended time. To get an idea of how common the need for care is, consider the current aging population. Until the year 2030, 10,000 Baby Boomers will turn 65 every day, and 7 out of 10 will need some form of long-term care.1 It is also important to note that, while long-term care may be associated primarily with seniors, this prolonged care is for any individual who suffers from an illness, accident or disability that requires them to have some form of regular medical care.
While the need for long-term care is commonplace among seniors, many are not planning ahead for the cost of care. A survey conducted by The Associated Press NORC Center for Public Affairs Research between 2013 and 2018 found that only about a third people 40 years and older report having saved money to help afford their future long-term care expenses.2 While 57% say that they personally need long-term care insurance, only 15% actually own it, according to the 2018 Insurance Barometer Study conducted by Life Happens and LIMRA.3
One of the most important factors to consider when talking about long-term care planning, is also one of the most often overlooked: the caregiver. According to another recent survey by The Associated Press-NORC Center for Public Affairs Research, four in 10 Americans have provided long-term care to a relative or friend.4 That same survey found that approximately one third of caregivers have neglected their own health needs (missing dentist appointments, prescription refills, etc.) because they were “too busy with their care giving duties.”4
Why long-term care insurance?
The figures aforementioned all underscore the importance of getting a jump start on planning ahead financially to avoid or minimize trouble finding and/or affording care in the future. Long-term care insurance is not "nursing home" coverage but insurance that helps assure to a policyholder, and their loved ones, of continued independence as they age without exhausting their personal assets.
Long-term care is expensive and often not covered by insurance. Care costs vary depending on the patient’s state of residence. According to the Genworth Cost of Care Survey 20181, the national average cost for a private room in a nursing home is $100,375 annually. The estimated annual salary for an in-home health aide is approximately $50,336 per year.1 Medicare does not cover long-term care services and Medicaid will provide such care services only for eligible individuals who meet certain financial and medical criteria. The cost of care, or having to provide care themselves, can become a burden to not only the patient but to their loved ones as well.
While long-term care insurance coverage may not be affordable for everyone, it can save thousands of dollars for policyholders and the loved ones who would have to otherwise bear the cost of care. There are essentially four major components that make up a long-term care insurance policy. Each piece collectively determines the cost and each can be changed to fit the needs of the policy holder. These components are:
- Your daily or monthly maximum benefit. The maximum amount your policy will pay each day or month for your care services.
- Lifetime maximum – stated in a number of years. The maximum amount paid by the policy for long-term care services received.
- Elimination Period. The amount of time that must pass after the policy benefit is triggered before payment for services received.5
- Inflation protection. A policy rider that increases a policy benefit value year-on-year by a steady percentage to help account for the rise in care costs.
As previously mentioned, it is important to keep in mind that long-term care insurance is not necessarily affordable for everyone. However, it is often less expensive than many may assume. Additionally, there are ways to minimize premiums and/or take advantage of discounts offered through membership with various associations. For example, organizations like the New York State Bar Association, alumni associations or other professional groups may offer discounts on coverage as a member benefit. For additional information about long-term care insurance, visit the NYSBA Insurance website here.
- Genworth Cost of Care Survey 2018, conducted by CareScout®, June 2018, Retrieved June 6, 2019, from https://www.genworth.com/aging-and-you/finances/cost-of-care.html
- AP-NORC Long-Term Care Poll, 2013-2018. 2018. Retrieved June 11, 2019, from https://www.longtermcarepoll.org/are-older-adults-financially-prepared-for-long-term-care/
- 2018 Insurance Barometer Study, Life Happens and LIMRA.
- AP-NORC Poll: Many caregivers neglecting their own health. October 15, 2018. Retrieved June 12, 2019, from https://www.longtermcarepoll.org/ap-norc-poll-many-caregivers-neglecting-their-own-health/
- Receiving Long-Term Care Insurance Benefits. U.S. Department of Health and Human Services. Received June 13, 2019, from https://longtermcare.acl.gov/costs-how-to-pay/what-is-long-term-care-insurance/receiving-long-term-care-insurance-benefits.html