Should You Buy Long-Term Care Insurance

Like all insurance, long-term care insurance policies are designed to cover risk. With these policies, the risk is that you will need custodial care such as in-home care, assisted living care or nursing home care. The best thing about these policies is that they create a pool of someone else’s money you can use to pay those expenses. However, not everyone is a candidate for long-term care insurance.

You should consider not buying long-term care insurance if:

• You can’t afford the premiums.
• You have limited assets.
• Your only source of income is a Social Security benefit or Supplemental Security Income (SSI). If you are living on a limited or fixed income or if you must go without basic needs to afford the premiums, you certainly should not buy a policy.
• You often have trouble paying for utilities, food, medicine or other important needs.

People who should consider purchasing long-term care insurance:

• Have significant assets and income.
• Want to protect assets and income.
• Want to pay for their own care.
• Want to stay independent of the support of others.

The primary benefit of long-term care insurance is peace of mind if the worst possible scenario occurs. The policy will pay what the contract agrees to pay and most (modern) policies will help people stay in their homes longer than they otherwise could if they rely on their own money. Although the cost of care varies, the “average” length of time on the long-term care continuum seems to be about five years for non-dementia patients and a longer time frame for dementia patients with healthy bodies. If you assume care would cost about $75,000 per year (in 2023 dollars), that’s about $400,000. An article in Barrons discusses how one financial planner prepares a plan for a client. “She subtracts $400,000 from a couple’s assets—an amount she feels is adequate to cover most people’s needs—to see if their planned withdrawal rate is still sustainable. If it’s not, she asks if there are other ways they can prepare for this potential expense, such as downsizing their house or cutting spending.” (See Barron’s article in Other Resources).

If you’re considering long-term care insurance, we recommend reviewing A Shopper’s Guide to Long-Term Care Insurance, prepared by the National Association of Insurance Commissioners. This 65-page booklet includes sections such as one asking “Will I need or use long-term care?” It provides the following information to consider as you answer that question:

If you have a major illness or injury—such as a stroke, heart attack or broken hip—and need assistance with activities of daily living, such as bathing or dressing, you may need long-term care. If you do need care, you may need nursing home or home care for only a short time. Or, you may need these services for many months, years or the rest of your life.

It’s hard to know if and when you’ll need long-term care, but the statisticsthat follow may help:

• Life expectancy after age 65 is about 19.4 years (20.6 years for females and 18 years for males). The longer people live, the greater the chance they’ll need help due to chronic conditions.

• About 11 million Americans of all ages require long-term care, but only 1.4 million live in nursing homes.

• About 70% of people who reach age 65 are expected to need some form of long- term care at least once in their lifetime.

• About 35% of people who reach age 65 are expected to enter a nursing home at least once in their lifetime. Of those who are in a nursing home, the average stay is a year.

• From 2015 to 2055, the number of people age 85 and older will almost triple, from more than 6 million to more.