Retirement is supposed to be a time to travel, pursue new interests, or otherwise make good use of the free time you’ll have once you’re no longer in the working world. But many seniors may also worry that their finances won’t be able to cover the need for long-term care in their later life.
The costs of long-term care can easily deplete the money you have saved up and maybe beyond the needs of your spouse or children. A private room in a nursing home can cost more than $90,000 a year, while a home health aide can come at an annual expense of more than $45,000.
Long-term care insurance is designed to help seniors meet these costs. Seniors might consider purchasing such a policy as they near retirement, or an adult child might want to buy a policy for a parent.
It is important to understand what will be covered by a long-term care insurance policy. Each policy will be different in its premiums and coverage. They may cover expenses such as nursing home and assisted living stays, home care services, home modification for aging in place, or even training for family members to better take care of a senior. Flexible policies are usually the most helpful since they can adapt to your changing needs as you age.
You should also consider your own personal situation. Do you have any health conditions or unhealthy habits which will make a stay in a long-term care facility more likely? Do you have any dependents who could be impoverished by long-term care costs if you found yourself in need of this help? Do you have enough money saved up to self-insure?
Time can be a critical factor in deciding whether to get long-term care insurance. Insurers are more likely to deny coverage if a person has a pre-existing condition or is already in need of long-term care since they are more likely to draw more from a policy that they will pay into it. Several insurers have opted out of long-term care insurance altogether for this reason.
The high costs of long-term care have also led to rising premiums in long-term care insurance. Premiums are likely to continue climbing over the life of the policy, and they may be more difficult to afford after you retire and have less income.
Stays in a long-term care facility may only last for a period of months rather than several years. If this occurs, you may pay far more for the insurance policy than you receive in benefits. You’ll also be less likely to require long-term care if you stay healthy, although you might still need this care if you suffer an unexpected ailment that limits your mobility or mental faculties.
It is important to understand the coverage and costs of a long-term care insurance policy before signing up for one. AARP says you are unlikely to be able to afford the policy if the premiums take up more than 10 percent of your income. You should also compare the policy to other methods of coverage, such as Medicare or self-insuring.