Long-Term Care Policy

Oct 2016

One of the toughest questions I get asked at seminars and by clients is about long-term care and long term care insurance. With people living longer than they did in the past, long-term care has become more of an issue than it ever has been before. It is something that all of us, whether regarding care for ourselves or for a loved one, will have to face in the future. One avenue to cover long-term care needs is to purchase a long-term care policy.

All too often when people decide to purchase long-term care insurance, it’s based upon fear. The insurance industry has done a good job of presenting data that’s meant to frighten people into purchasing long-term care insurance. Although I am not against long-term care policies, I believe they are not for everyone and consumers have to be extremely careful before they purchase one. I recently saw an article on long-term care that had a variety of statistics that may help you in making the decision of whether you pursue a long-term care policy or not.

I should mention that when it comes to long-term care insurance I treat it like any other type of insurance and that is it is need based. Not everyone needs long-term care insurance and certainly, not everyone should purchase it. Hopefully, some of these statistics will help you make the decision of whether you pursue a policy or not.

There is a general belief that everyone is going to end up in a nursing home and be there for years. Fortunately, the statistics prove otherwise. The average duration of a nursing home stay for men is .88 years and for woman 1.4 years. The probability of a man needing more than one year in a nursing home is 22 percent and that number jumps to 36 percent for women. The probability of needing nursing home care for more than five years is only two percent for a man and seven percent for a woman. What these statistics show is that if you are going to purchase long-term care, more likely than not you don’t need a policy that provides benefits for more than three or five years.

In deciding whether you are going to purchase a long-term care policy it’s a good idea to have an idea of what the cost of care is. After all, for someone with sufficient resources, long-term care insurance may not be needed. According to this new report, the median average annual cost for an assisted living facility is $43,539 and the median annual nursing home cost is approximately $82,000. I believe it’s important to have an idea of the numbers because unfortunately, too many people who sell long-term care insurance tend to exaggerate the needs and the benefits while at the same time, downplaying the cost of long-term care insurance.

Long-term care insurance is not for everyone. In addition, if you are thinking about buying a policy it doesn’t mean you have to cover 100 percent of the cost. You can be self-insured for part of the cost and use the insurance to supplement your needs. The issue, however, that you need to consider is that long-term care insurance companies are notorious for not paying their claims. Therefore, it is important that if you buy long-term care insurance, you realize that you’re going to have to have an advocate who will deal with the insurance company to make sure your claim is properly processed.

Buying long-term care insurance is not easy. You need to do your homework to make sure you select a company that honors and pay their claims. It’s not the insurance company that has the cheapest premiums that you want; rather you want the one that will honor your claim in times of need and unfortunately, those companies are getting more and more difficult to find.

Good luck!