Considering Longterm Care Coverage in Your Financial Planning

Trying to predict future healthcare expenses is a major challenge in retirement financial planning and one of the most emotional elements is evaluating the need for longterm care insurance. Longterm care describes services a person may need—usually, but not exclusively, at an older age—to help perform daily living activities. Longer life spans make the need for some type of longterm care increasingly likely, yet it is common for people to think they will beat the odds and not require such care. 

The fact is the U.S. Department of Health and Human Services reports 70 percent of those over age 65 eventually will need some form of longterm care. It adds that about one-third of Americans over 65 will require nursing home care, where the average annual cost for a private room is now more than $94,000.₁ 

So, significant costs can be involved and relying on government programs to pay can be problematic. Medicare typically only covers certain longterm services and care, and only for a limited period of time. Medicaid will likely only provide benefits once you spend down your assets.

In considering a protection plan of your own, there are three main ways to approach longterm care coverage:

• Self-funding – for which you need sufficient savings to cover potential future care expenses that may run into the hundreds of thousands of dollars. For many people, this is not realistic.
• Traditional longterm care insurance – provides reimbursement up to a daily maximum and for a set period of time for longterm care expenses. Policies vary widely, so it is important to do sufficient research to select the level and cost of coverage that is appropriate for you.
• A combination policy – a life insurance policy that includes a component of longterm care coverage.

In making these decisions it is necessary to accurately determine what longterm care approach best fits your needs. A financial advisor can help you evaluate your options. With the right choices, longterm care insurance can provide financial protection for you and ease the burden on those who might be responsible for your care. 

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