Do You Need Long-Term Care Coverage?

by Miranda Marquit · 9 comments

My husband and I are only in our early 30s, but we’re still interested in the idea of long-term care. This is mainly because we’ve already decided that we don’t want to live in our own home as we age; we’d rather live in a retirement community, particularly those that offer some sort of assisted-living services.

However, we know that living in such communities can get expensive — especially if some sort of care is needed. Indeed, according to what I read in Consumer Reports Money Adviser, the cost of living in an assisted-living facility is more than $2,400 a month at the low end. At the high end, it can be more than $5,700 a month.

A long-term care policy might help with that, but can you rely on it to be there when you need it?

Problems with Long-Term Care Insurance Policies

Money Adviser points out that there are problems arising in the area of long-term care. One of the issues is that the current low-rate environment makes it difficult for insurers to build up the kind of reserves they need to make good on policies. With people living longer, this situation isn’t exactly a positive one for insurance companies that want to make profits.

So, many of the insurers that offered long-term care insurance are no longer providing those policies. And those that still do offer long-term care policies are raising premiums. By a lot.

If you’re looking to buy a long-term care policy, you could be in trouble; you might get stuck with huge premiums. While there are some companies that will refund part of your premium if you don’t end up needing long-term care, for the most part, you’re stuck. And, if your premiums rise and you can’t afford them, you either have to scale back your coverage — or cancel the policy, possibly losing all the money you’ve paid in over the years.

Even hybrid policies that combine life insurance coverage with long-term care coverage may not be the best choice. Indeed, those can be even more expensive in the long run than a regular long-term care policy, depending on the benefits you can expect.

What Should You Do Instead?

Consider your options. Look at your retirement situation. As you figure out how much you’ll need in retirement, consider the cost of long-term care. Realize there are some situations where Medicare won’t cover your long-term care, so don’t rely on that program to keep you solvent. If you plan carefully, there won’t be a need to buy a long-term care policy — because you’ll have arranged for the cash flow you need during retirement.

The first step is saving up, and using your retirement investment accounts to build wealth. But you can also look for ways to generate regular income during retirement, through an income portfolio, rental properties, a business, or some sort of online venture. You can also consider saving up enough to buy an annuity that will pay you enough to cover your long-term care costs. (Be careful, though. Annuities aren’t for everyone, and they have their own problems.)

Don’t assume that long-term care insurance is the way to go. Consider your individual situation, and plan ahead. You can’t count on long-term care insurance to cover all your bases.

Do you have long-term care insurance?

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{ 9 comments… read them below or add one }

Tim Barnes, CLU September 4, 2012 at 9:23 am

I agree with the answer above but for a different reason. Most LTCI policies will only pay a benefit if you are unable to perform 2 out of 6 Activities of Daily Living. Retirement communities and Assisted Living facilities are not the same thing. Your LTCI policy will only pay if you need the Assisted Living help. If all you are doing is saving for space in a Retirement community, it would be a waste of money. LTCI is for people who want help paying the bills for Long Term Care. It is not a savings plan for retirement. If that is your goal, there are other financial vehicles available.

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Garrett September 4, 2012 at 10:57 am

“This is mainly because we’ve already decided that we don’t want to live in our own home as we age; we’d rather live in a retirement community”

I don’t think I’ve ever heard of anyone who actually WANTS to live in an assisted care living facility rather than their own home as they get older. I’d have to guess that I would need to be so senile that I don’t even realize I am in an old folks home/community before I would actually accept staying in one.

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David Kane September 4, 2012 at 11:34 am

Almost 40% of those receiving long term care in America are under 65.

Although 30 is a young age to start paying for your policy maybe another approach might be more appropriate. http://ltcinsurancequote.com/quote.html Consider life insurance with a long term care rider. Many people in their 30s buy life insurance usually a limited “term” policy as mortgage insurance, with Life/LTC you’ll have both.

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Dr. Robert Weed September 4, 2012 at 12:54 pm

Long Term Care Insurance is still the best value for planning for the physical, emotional and financial burdens Long Term Care places on family and friends.

The risk of needing care is very high because of the advances in medical science. We all know the numbers.

Paying an affordable premium for a pool of tax-free money and benefits, including case management, makes more sense then using your own money and placing the rest of the burden on family.

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Peter at Savings Bond September 4, 2012 at 6:16 pm

Instead of a straight annuity, I urge readers to consider longevity insurance: it’s like an immediate annuity in that a lump sum now is converted into an income stream later. The twist is that one must pick a date on which to start receiving the income. I hear most people pick 85. The risk is that one dies before the income stream starts, but the benefit is that one is guaranteed against outliving assets, especially as income stream becomes larger if payments are delayed far into the future.

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Ferdinand September 4, 2012 at 7:41 pm

Yes, people are aware how Long Term Care Coverage can easily wipe out a lifetime’s savings. In my opinion, i think its sad sending our parents to nursing facility, i really do. I have come from a family where its has always been an idea that families stay together until the end. Although we are slowly adjusting with the world. We cannot just simply help it but be sad at all.

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Shane September 7, 2012 at 10:48 am

I think it is always wise to invest in your health and future.

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Jake March 27, 2014 at 11:39 am

Nice post!

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Jess from Laconia NH Assisted Living March 27, 2014 at 11:41 am

Thinking about the long-term is always a great idea, and in my opinion it’s never to early to started. Being financially secure and in good health come retirement is very important to me.

– Jess

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