Who Needs Long Term Care Insurance?
Before asking who needs long term care insurance, it can help to define what this means. Typically, long term care means care in an assisted living facility, nursing home, adult day care, or care at home from a home health aid. It could also include long-term therapy, hospice, and some other services. This tends to be associated with elderly people, but it might also be for younger people who are mentally or physically disabled, injured, or ill.
Medicare and Major Medical Do Not Cover Most Long Term Care
Major medical insurance was not intended to cover most long term care needs, and you should not count on your regular health insurance for long-term residential or home health care needs. Long term care insurance is a product that is a type of health insurance created to specifically cover this type of care. However, these plans are not standardized, can be complicated, and also may be confusing. This leads many people wonder if they need long term care insurance, or LTCi, of if they can count on long term care insurance alternatives.
How Much Do Long Term Care Alternatives Cost?
These are some cost averages from the U.S. Department of Health and Human Services as published on LongTermCare.gov:
- Nursing homes: Over $6K a month
- Assisted living facilities: Over $3K a month
- Home health care aids: About $21/hour
It should be clear that these expenses can dry up a lifetime of savings very quickly for many middle class families. Typically, a health crisis gives people a fairly urgent need to seek out one of these types of care, but it is never predictable. Latest estimates do tell us that anywhere from 1/3 to 1/2 of 65 year-old people today will need long term care at some point in their lives.
Do You Need Long Term Care Insurance?
If you are not sitting on a big pile of money, you do need a solution even if you do not need long term care insurance. Right now, Medicaid pays for over 40 percent of long term care expenses in the U.S. today. Qualification rules are different in each state, but they typically involve spending most of your savings first. Medicaid might be viewed as a safety net that many people have to rely upon, but do you have alternatives if you would like to keep your estate intact?
Typical solutions include:
- LTCi policies provide benefits.
- Some types of permanent life insurance and annuities have features that may help pay for care.
- Reverse mortgages and home equity loans can provide money, and reverse mortgages may be a good solution for some people, but they could also put a home at risk.
- A big pile of cash can certainly help if you have it.
You can do more research on your own, but planning is essential. Even if you are sure you have no alternatives, you should understand Medicaid rules in your state to understand what it takes to qualify. Some qualified LTCi policies are tax deductible, so you may decide you do need long term care insurance after all.
Dave Ramsey Video on Long Term Care Insurance (LTCi)