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What’s the Average Cost of Long-Term Care Insurance

As people age or become ill, they sometimes want help doing daily tasks like getting dressed, bathing, and more. Long-term care offers people those services—but it’s costly. According to the Alzheimer’s Association, the estimated expenses for end-of-life care in 2016 ranged between $217,820 and $341,651.Most health and disability insurance would not cover long-term care, but long-term care insurance will.

What Long-Term Care Insurance Covers

• Nursing home care
• In-home care
• Home modification
• Care coordination
• Assisted living facilities
• Adult day care services

Forms of Long-Term Care Insurance

Traditional Long-Term-Care Insurance

The average cost of a semi private nursing home room nationwide is $85,775 per year, according to Genworth’s 2017 Cost of Care Survey. Assisted living runs $45,000 annually, and home health aides charge $135 each day. Traditional long-term care insurance ensures that no matter where you need care, you will have the money to cover at least a portion of the bill. A lengthy stay at a nursing center is less likely to drain your savings or wipe out your estate.

According to a LifePlans, Inc. survey, the medium annual long-term care insurance premium is $2,727. That offers a benefit of $161 per day for nursing home care for a set number of years (four is most common). Even better, you can include an inflation rider that increases your daily benefit with time, basically by 3% a year.

Long-term care is triggered when you can no longer perform two out of six activities of daily living like dressing, bathing, eating, transferring to a wheelchair, etc., or suffer from severe cognitive impairment. Benefits begin after a waiting period of 30–90 days.

Want to ensure your family is covered no matter what happens? Check on your health care coverage before it becomes an emergency.

Hybrid Life and Long-Term Care Health Insurance

Another increasingly common option is a policy that combines life insurance with long-term care coverage. With a hybrid plan, you can access the death benefit—the money that your beneficiaries would receive in the event of your death—while you are still alive to pay for long-term care. And if you end up not requiring care, your heirs get the full payout.

Rates are regarded as “noncancellable,” which means premiums are fixed for life (and typically paid all at once upfront). Hybrid policies should be a last resort and only used if you cannot qualify for a traditional long-term care insurance policy because of medical underwriting.

A single premium means you will have to come up with tens of thousands of dollars at once—money you could have otherwise invested for retirement. You may also be purchasing life insurance you do not need. And, unlike traditional long-term care insurance, the premiums for hybrid plans are not tax-deductible.

Similar to whole life insurance, the biggest risk of these hybrid policies is that you could forego thousands of dollars in potential earnings on your investment. The policies do not guarantee that you will earn market rates; the benefit paid is only the policy’s face value. Those lost earnings could end up making hybrids the most-costly long-term care policy of all.

What Next?

The best way to purchase long-term care insurance is to go to an independent insurance broker. They will shop among several different insurance carriers to find you the best price based on your particular location, situation, age, health, etc. Long-term care is a significant decision, so ensure you get a professional on your side.

Resources and References:

• Hybrid Plans
• Cost of Care