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Thursday, January 16, 2014

The top 4 reasons people don't buy long-term care insurance

By Jenni Wiltz

Long-term care insurance costs canb e financially crippling
If you don't have a plan for long-term care, you're not alone. Many near-retirees and seniors haven't thought about the kind of care they'll need as they age, let alone how much that care could cost. If the reasons below sound familiar, take a look and see how avoiding the issue could be disastrous for your finances. 

Reason #1: I won't need long-term care.

The uncomfortable truth is that you probably will. According to the Genworth/Age Wave report, "Our Family, Our Future," a whopping 66% of people (that's two-thirds of all Americans) will need long-term care at some point after they turn 65. Don't let these costs drain your retirement account.

You worked hard and saved for years so you could enjoy your golden years, and perhaps even leave some money behind for your family. A financial advisor can help you analyze your portfolio and set aside money for long-term care. Some life insurance policies and annuities will let you access your funds to pay for care. 

Reason #2: I don't want to think about this. It's too uncomfortable.

Yes, it is. No one can deny that thinking about aging and mortality is scary. But talking about long-term care doesn't mean it's going to happen to you. Once you've discussed it and made your plan, you don't have to think about it any more. You won't have that nagging feeling at the back of your head asking, "What if?" Planning now gives you and your family more options later.

Reason #3: Isn't this covered by Medicare or Medicaid? 

In most cases, Medicare won't cover long-term care. The exception is for times when that care is part of a recovery from an illness or operation that required hospitalization. If you need care because you're getting older and can't move around as well, that won't be covered.

Unlike Medicare, Medicaid programs are state-run. They are designed to help extremely low-income individuals.  If you have qualified assets that add up to less than $2,000 and an annual income near the federal poverty line, you may qualify. Don't be in a rush to sell off your assets, though. Some states also require a five-year lookback on assets to make sure you're not gaming the system.

What this means is, essentially, there's no form of governmental long-term care insurance. That might not seem so bad, until you look at what those costs can be. Here are the average total lifetime costs for different long-term care services over the course of treatment:
  • Home Health Care: $196,560
  • Adult Day Care: $81,900
  • Assisted Living: $187,758
  • Semi-Private Nursing Home Room: $195,275
  • Private Nursing Home Room: $218,087
These figures come from a Nationwide Financial presentation on long-term care. They take into account the yearly average for each type of care, multiplied by the average number of years that care is required. These spiraling costs are what have driven some to seek out long-term care insurance. 

Reason #4: I don't trust insurance companies. What if they aren't there when I need them?

Many seniors don't buy long-term care policies because they don't trust the company to pay out. However, there are companies with proven track records in paying claims. If you're interested in a policy, the best thing to do is work with a broker who has access to policies from multiple carriers.
Next, check out the ratings for each of those carriers. Rating services like A.M. Best, Standard & Poor's, and Moody's are companies that monitor credit ratings for the financial industry. They give insurers ratings that tell you how well the companies are doing. It's a good idea to choose which company to buy from based partially on how well they're rated. 

Don't let these four reasons keep you from planning for long-term care. Whether you start saving, rebalance your portfolio, or buy insurance, the important thing is that you make a plan. Care is only getting more expensive, and you don't want your hard work saving for retirement to be put at risk by an expense you just didn't plan for.

About the author: Jenni Wiltz writes about aging, long-term care, insurance, and financial planning for WholesaleInsurance.net.

Image license: Ken Wilcox, CC BY ND-2.0


  1. We and doctors and hospitals, etc. all want to believe we can live forever. Our fixation with living forever or being kept alive as long as possible, usually means living well beyond maintaining a reasonable quality of life. At what cost? Thanks to the ever growing "health care industrial complex", we'll all die poor. I'll know that when I need long term care it'll be time to check out.
    - Tom from http://www.lifeant.com/blog/

  2. Clearly, most of these reasons are due to lack of awareness about long term care. Thanks for clearing these all out. This will help a lot of people reconsider their strategy for long term care so we featured it in our Weekly Digest. You can read it here www.ltcoptions.com/weekly-digest-role-ltc-health-care-advocates-care-recipients-caregivers.