Why Personal Liability Risks Spike in the SummerThe number one fear of people 50 and older is the cost of health care. In 2015, Fidelity’s Retirement Health Care Cost Estimate predicted a 65 year-old couple would spend $245,000 for health care costs in retirement. That projection does not include the cost of long-term care. In addition to planning for health care expenses, what is the expected cost of long-term care, how likely is one to need it, and how should you plan for it?
It might be helpful to start by defining long-term care. It generally refers to non-medical care required to assist with Activities of Daily Living (ADLs). There are six ADLs: eating, bathing, dressing, walking, continence, and toileting. This type of care is typically not covered by Medicare.
Cost of long-term care services
The Boston College Center for Retirement Research 2014 study estimates 44 percent of men and 58 percent of women, age 65 or older, will need nursing home care; 10 months of care for men and 16 months for women. Today, a 16 month stay in a private nursing home room is $123,168. By 2026, the same stay will be $165,520.
Long-term care may also be delivered at home and in assisted living facilities. In fact, the majority of long-term care begins and ends in the home. The 2016 national average monthly cost for Home Health Aide and Homemaker Services is $3,861and $3,813, respectively. In just 10 years, those same services are expected to be $5,189 and $5,124.
The need for long-term care
Most industry experts and government agencies predict that 70 percent of 65 years-old will need some form of long-term care in their lifetime. More than half of long-term care claims are for two year or less.
The facts about long-term care insurance
There are many misconceptions about long-term care insurance. Here are some facts:
- Long-term care expenses often have an impact on family members, even more so when long-term care insurance is not a part of the picture. 77 percent of caregivers lost time at work to provide care. On average, a caregiver contributes $10,000 to long-term care expenses and 62 percent of caregivers use their own savings to pay for care.
- Most long-term care insurance products sold today have no restrictions about where qualifying long-term care can be provided, including at home, assisted living, community resources like adult day care, and in nursing home facilities.
- Policies are now priced so that future premium increases will be unnecessary. Actuarial studies of current pricing reveal that 90 percent of products on the market today will never require a premium increase. If a premium adjustment is needed on the remaining 10 percent, the average increase is predicted to be 10 percent of premium or less.
- Some consumers hesitate to buy long-term care insurance because it may never be needed or they believe the cost of the insurance outweighs the benefits. As stated earlier. the likelihood long-term care will be needed is high, especially for women; two-thirds of nursing home residents are women. Perhaps most importantly, for every $1 of premium paid, beneficiaries of long-term care insurance receive $2.78 in benefits. That’s almost $3 received for every $1 of paid premium.
In addition to stand-alone long-term care insurance policies, other insurance products, like life insurance and annuities, offer optional riders that cover long-term care expenses. These combo or hybrid policies may be appropriate when there is an additional need for life insurance or an annuity.
A financial professional is a good resource to evaluate the options and recommend a solution that works for your unique situation. At Heffernan Insurance Brokers, we believe there is no one-size-fits-all when it comes to protecting your family and your assets. Still have questions? Call us at 1-855-700-1988 or visit our website.
