Your grandfather. Your aunt. Your mother-in-law. We all know someone who requires significant assistance with the daily activities of living in the latter stages of life. Some of us are even the one who is tasked with providing the care our loved one can no longer provide for themselves. Yet very few of us plan for the likelihood that we will be in that position someday, too.
According to the U.S. Department of Health & Human Services, about 70% of people over age 65 will require at least some type of long-term care in their lifetimes, and 40% are likely to need care in a nursing home. A serious injury, illness, or the onset of Alzheimer’s or dementia can quickly lead to the inability to fully care for ourselves, and sometimes we simply lose the ability to fully care for ourselves as we age. And, if the person responsible for caring for us, such as a spouse or other family member, passes away, moves, or develops an inhibiting condition of their own, we will be left to fend for ourselves. These are not pleasant thoughts, but it is the reality for many.
For-hire assistance is available, but the cost of long-term care is staggering. These were the average annual costs in Michigan in 2016:
- Nursing home: $103,164
- Home health care: $47,720 (skilled care from a nurse is more expensive)
- Assisted living facility: $44,658
These expenses have the potential to wipe out savings and put an extra burden on family members, who are often forced to provide daily care or help with long-term care expenses. While many people assume that government programs, such as Medicare, will pay for long-term care expenses, it’s unfortunately not true.
Medicare and most health insurance plans pay for acute medical services, but they don’t typically pay for long term custodial services. They won’t pay for help with activities of daily living, such as eating, bathing, dressing, continence, toileting, and moving from place to place. If you’re not able to perform these activities on your own, you’ll need help. The same is true if you develop severe cognitive impairment, such as Alzheimer’s or dementia, and require continuous supervision.
There are three ways to address long-term care expenses:
- Be rich (so you can afford to pay these expenses yourself)
- Be far from rich (so Medicaid will pay)
- Be insured (for those in the middle)
The best time to consider long-term care insurance is when you don’t need it. You’ll probably never be healthier than you are today, and you’ll definitely never be younger! Long-term care insurance requires an applicant to meet certain standards of health in order to purchase a policy, so it’s important to apply before your health deteriorates. And, the cost of a policy increases with age, so it makes sense to purchase a policy sooner rather than later. The age bracket when most long-term care policies are purchased is 50 to 60, but most insurance companies will consider applicants up to age 80, assuming they are in good enough health to qualify.
If you’re considering ways to manage long-term care costs, we can provide benefit and cost illustrations for traditional long-term care insurance and for a hybrid policy that combines life insurance with long-term care insurance. A valuable feature of the hybrid policy is its return of premium guarantee, in case you ever decide you want your money back. With this policy, you’ll get your money back one way or another… either by using the long-term care coverage, receiving the life insurance payment, or by cancelling your policy before using any of the coverage and getting back every dollar you paid for it. It’s hard to go wrong with this type of policy, since you’ll never get back less money than you paid (following an initial five year graded surrender charge).
We know planning for long-term care expenses can be a daunting subject, and I’m sure you have some questions about it. Please call or email and we’ll be happy to provide insights for your specific situation and help any way we can.