BY ANSLEY FENDER
Discussions of health as we get older typically revolve around fears of serious illness, such as cognitive diseases or cancer. These discussions tend to focus on quantity of life, often failing to consider the need for a fulfilling quality of life. The truth is, while many seniors will never develop Alzheimer’s disease or another serious illness, they may require assistance with activities of daily living, such as cooking, bathing, or taking medication. This type of assistance, which can vary from unskilled, home-based care to skilled care in a nursing home, is referred to as long-term care (LTC), and according to the Department of Health and Human Services, 70 percent of adults over the age of 65 will need it at some time.
All LTC is expensive. In 2017, OneAmerica, an LTC insurance company, estimated the cost at nearly $18,000 per year for adult daycare and up to $92,000 per year for a private room in a nursing home. While the scope of care varies, the Administration on Aging reports that the average recipient receives three years of care; 37 percent of recipients need one year of care in an assisted living or nursing home facility.
Unfortunately, health insurance and Medicare only cover a portion of the cost for a limited time. When these benefits lapse, Medicaid can be utilized, but only by those below an income threshold and asset limit. Recipients of Medicaid are also subject to estate recovery in which the government can recuperate funding by collecting from the beneficiary’s estate upon death.
Long-term care insurance was designed to remove these financial stresses and uncertainties. Many insurers are adopting a hybrid policy that provides coverage if LTC is needed but eliminates the risk of losing one’s investment should the need for LTC never arise. Rather than losing the funds, the unused benefits are paid out as a death benefit, much like a life insurance policy.
LTC insurance is important for anyone, regardless of net worth. However, it is particularly important for individuals who have enough money to support their retirement but who lack significant excess funds. Paying for care out of pocket could derail a carefully planned retirement, or at least significantly reduce one’s quality of life during it. For those without the means to pay for LTC and who either do not qualify for or do not wish to use Medicaid, the burden will fall on loved ones to either provide unskilled care themselves or finance skilled care out of their own pockets.
Planning is key with LTC insurance. Individuals wishing to secure coverage must be at least 45–50 years of age before insurers will consider their applications. Once an application is submitted, the applicant must undergo a thorough interview and physical examination to determine eligibility. Pre-existing conditions do not necessarily disqualify applicants, which is why it is important to discuss your situation with an LTC insurer.
Ansley Fender is a personal finance coach and freelance writer who is passionate about helping individuals and families make sense of their money in order to create abundant and fulfilling lives. She is the owner of Fender Financial Services, a bookkeeping firm for nonprofit organizations and small businesses.