According to the U.S. Department of Health and Human Services, someone turning age 65 today has almost a 70% chance of needing some type of long-term care services and supports in their remaining years. Whether you or your spouse will require long-term care is difficult to predict. But it is wise to consider long-term care insurance and whether it may be a good idea for you.
Cost of Care
Perhaps the first consideration is determining the potential cost of long-term care. Below is a summary of current costs according to the Genworth 2018 Cost of Care Survey.
Median costs in the United States:1
- $245/day for a semiprivate room in a nursing home
- $275/day for a private room in a nursing home
- $4,000/month for care in an assisted living facility (for a one-bedroom unit)
- $138/day for a home health aide
- $132/day for homemaker/companion services
With health care costs rising every year, these expenses can be expected to grow substantially over time. Furthermore, neither Medicare nor Medicare supplemental coverage, also known as Medigap insurance, typically covers long-term care. Medicaid will cover a large share of such services but only if you meet stringent financial and functional criteria. What's more, most employer-sponsored or private health insurance plans follow the same general rules as Medicare. Therefore, most people who need long-term care must pay for some or all of it on their own.
Cost of Insurance
Like life insurance, long-term care insurance policy premiums largely depend on your age and health. If you take out a policy when you are young, you can expect to pay comparatively low premiums during the life of the plan, while starting a new policy when you are older will entail significantly higher monthly premiums.
Most long-term care policies sold today are federally tax qualified, which means the premiums paid (within specified dollar limits) and out-of-pocket expenses for long-term care may be applied to the medical expense deduction of the federal tax code. (For the 2019 tax year, seniors may deduct the portion of medical and dental expenses that exceeds 10% of adjusted gross income.) Additionally, long-term care benefits received are not taxed as income up to certain limits. Consult with a tax advisor to learn more about the tax implications of long-term care insurance.
Long-term care policies are complex and vary widely. But in general, long-term care insurance typically covers the following:
- Nursing home care
- Adult day care
- Visiting nurses
- Assisted living
- In-home assistance with daily activities
Long-term care includes a range of nursing, social, and rehabilitative services for people who need ongoing assistance due to a chronic illness or disability. Long-term care insurance can be used by anyone at any age who suffers an accident or debilitating illness, but it most frequently is used by older adults who need assistance with essential physical needs, such as bathing, dressing, or eating.
Deciding whether to purchase long-term care insurance will depend on your personal situation. You may want to consider your family health history, your level of assets to potentially pay for long-term care, and your feelings about relying on family members for support. Probing these and other individual circumstances can help you make a well-informed decision.
1Source: Genworth, 2018 Cost of Care Survey, 2018.
The cost and availability of Life Insurance depend on many factors such as age, health, and amount of insurance purchased. In addition to premiums, there are contract limitations, fees, exclusions, reductions of benefits, and charges associated with policy. And if a policy is surrendered prematurely, there may be surrender charges and income tax implications. Any guarantees are contingent upon the claims-paying ability of the issuing company.
Because of the possibility of human or mechanical error by DST Systems, Inc. or its sources, neither DST Systems, Inc. nor its sources guarantees the accuracy, adequacy, completeness or availability of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. In no event shall DST Systems, Inc. be liable for any indirect, special or consequential damages in connection with subscriber's or others' use of the content.
© 2019 DST Systems, Inc. Reproduction in whole or in part prohibited, except by permission. All rights reserved. Not responsible for any errors or omissions. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. This article was prepared by DST Systems Inc. This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor. Please consult me if you have any questions. LPL Financial Representatives offer access to Trust Services through The Private Trust Company N.A., an affiliate of LPL Financial.