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Long term care insurance coverage is designed to help you cover the costs of a nursing house or other proficient care as you age. Just like many insurance coverageinsurance plan, you must think about buying it before you require it, as policies end up being either unavailable or prohibitively costly once it ends up being clear that you require the protection.
Long term care insurance typically offers monetary aid for those who require specialized care on an everydaydaily. And with rare exceptions, once you start requiring nursing-home care beyond a rehabilitation stint that Medicare or your health insurancemedical insurance will likely cover, theres a good chancea likelihood youll require that look after the rest of your life.
The opportunity this mix produces
If your health forces you to make an irreversible movetransfer to a nursing homea retirement home, the rest of your significant assets (like your house, vehicle, or perhaps any savings you may have) end up being far less helpful to you. So if youre living alone or if your spouse likewise needs care, then these possessions can be sold to assist cover the expenses of the care.
When your assets end up being almost entirely depleted, Medicaid will step in to cover your staying long term care costs. Not all nursing home centers accept Medicaid, however, so you should see to it that yours does if you may require the assistance of Medicaid.
Furthermore, if youre married and only one spouse requires nursing-home care, then Medicaid offers some defenses for the remaining partner. It usually permits the spouse who does not require care to keep a reasonable location to live and adequate possessions and income not to require that continuing to be spouse into abject poverty. Once both you and your spouse pass away, your state might have a Medicaid-related claim against your estate, but that would be a concern for your beneficiaries.
Put those aspects together, and the net result is that long term care insurance typically isn’t required to protect you or your spouse from abject poverty need to the need for nursing-home care arise. It can be an useful tool to secure a few of your estate for your beneficiaries if leaving an inheritance is crucial to you.
To insure or not to insure? That is the question
Eventually, if youre pondering long term care insurance coverage, youre thinking about whether to trade a specific cost today (the insurance coverage premium) for the prospective cost down the roadway (the care itself). Numerous individualsMany individuals start to go shoppinglook for long term care insurance in their 50s, at which point long term care insurance can cost countless dollars per year.
Premiums can differ based on your age, health, and the insurance companys certain underwriting aspects. Your premium will likewise depend upon your personal choices, like the optimum everyday advantage level, the length of stay your policy would cover, and any waiting durations before the protection starts.
According to the American Association for Long Term Care insurance coverage, if a typical 60 year-old couple purchased protection with an inflation rider that would cover $164,000 of lifetime care per spouse today and $365,000 each at age 85, their premium cost would be around $3,840 per year. For an individual 55-year-old looking for similar protection, the price tag would vary between $1,700 and $3,400 per year.
Unfortunately, costs for individual strategies are difficult to come by without talking with an insurance coverage salesperson. Theres a complimentary premium calculator device readily available for federal government employees who certifyget approved for their group plan at this link. While pricing in that group strategy will be various from the expenses you will face, it can a minimum of offer a ballpark estimate as you shoplook for your own long term care insurance.
Unless you reasonably expect to work till you die or become incapacitated, youll have to keep paying those premiums throughout your retirement to keep the insurance coverage in force. In other words, youll requirement enough spare earnings in your retirement to pay the premiums, which would need a decent possession base, a strong pension, and/or a really low expense of living.
Undoubtedly, provided that long term care insurance coverage primarily protects your estate from Medicaid seizures, it generally just makes sense to lug that insurance coverage if you have a decently favorable net worth.
At the upper end of the net worth scale, if you have adequate net worth, you can self-insure by reserving a pool of cash to cover the expense of any long term care you may require in the future. You see, according to Genworth (NYSE: GNW), the average yearly cost of a nursing home room is around $80,300 annually for a semi-private room or $91,250 for a personal room. And according to the American Association for Long Term Care Insurance coverage, just about 12 % of people stay in nursing houses for more than five years. Additionally, a common stay is generally shorter if youre married than if youre not, most likely reflecting the truththat one member of a couple often works as a caretaker for the other as they age, postponing the requirement to move to the nursing houseretirement home.
So, provided that a common couple is not likely to invest more than about $1 million on long term care ($100,000 annually x 2 people x 5 years per individual), insurance looks less rewarding if your net worth is beyond $2 million, particularly if youre a decent financier.
Its your option
You might desirewish to think about purchasing long term care insurance if all 3 of these use to you:
- You desirewish to leave an estate to your successors;
- You have enough retirement earnings to dependably cover both your expected retirement lifestyle and the long term care insurance coverage premiums; and
- Dont have enough in assets to reasonably self-insure versus the risk
Otherwise, opportunities are excellent that you can find better uses for your money than purchasing that particular insurance coverage.