The good news is that Americans are living longer. The not so good news is that many of us must figure out how we're going to cover the costs of healthcare associated with getting older and living another 10 to 20 years. One way to help cover long term medical expenses is to consider long term care insurance.
Unfortunately, long term care insurance hasn't been as well received as many other types of insurance products. Why? Because it's often thought of as unnecessary - a type of insurance for medical costs that are already covered under Medicare as we get older. But what many people don't understand is that long -term care isn't medical care per se, but help for basic personal tasks of everyday life (sometimes referred to as activities of daily living or custodial care), something that Medicare doesn't cover.
Long term care for a loved one can be expensive. According to Longtermcare.gov, the cost of care in a semi-private room in a nursing home is $6,844 per month, and costs will continue to rise.1 For this reason, it's important for consumers to fully understand how long-term care insurance works.
The following are three reasons why you may need to consider long-term care insurance:
Reason #1: To protect your assetsIf your spouse requires some type of long term care, how do you plan on covering the costs? Many couples will have to rely on their combined income and assets to pay for the long term care of a spouse, putting a serious drain on your retirement savings. Long term care insurance can help solve this problem and allow you to retain more of your savings.
Reason #2: To help your family with your care
Have your children or extended family promised to take care of you as you become older? Do they have the finances and time? A recent study shows that caregivers are spending $6,954 a year - nearly 20 percent of their income - on out-of-pocket (OOP) costs related to caregiving.2 While the thought having to pay for someone to help you with things such as toileting or bathing isn't a pleasant thought, it may become necessary at some point in the future. Long term care insurance will help pay for these types of services, ensuring that you get the care that you need while not putting a burden on your family's finances or time.
Reason #3: To maintain your independence
Today's assisted living facilities are quickly becoming the preferred alternative to nursing home care, but this preference can come with a higher cost. Without the assets to cover the cost of this type of care, you may be eligible for a type of low-income program called Medicaid. However, the downside is that you must be able to qualify for the coverage and Medicaid typically only pays for a semiprivate room in a nursing home - not assisted living. Moreover, not all nursing homes will accept Medicaid patients.
The retirement direction that you take without having long term care insurance may not be what you planned. Without the protection, you're options for paying for these types of services may be paying out-of-pocket or self-funding your care, relying on family or friends for help, or working within the limitations of what Medicare/Medicaid may be able to contribute - if anything at all.