According to the Department of Health and Human Services, those of us who reach age 65 will have a 40% chance of entering a nursing home, and 10% will stay in one for five years or more. So does this mean you need long-term care insurance? Possibly.
Those numbers don't take into account the millions of aging adults who will need some kind of in-home care as their health falters. By 2020, 12 million older Americans will need long-term care, according to one government estimate. Most will be cared for at home by family members.
Long-term insurance is marketed as a way to fill in the financial gaps if you have a chronic illness or disability and need help with the activities of daily life, like bathing and getting dressed.
"The additional expense of long-term [care] can be $40,000-$90,000 a year," says Rich Arzaga, founder of Cornerstone Wealth Management. "The average American cannot survive this risk and expense."
Nor can you count on the government to bail you out when the time comes: Medicare doesn't pay for "custodial care." Medicare pays only for medically necessary, skilled nursing facility or home health care. It may not give you the choice of the best care in your area. And while Medicaid pays for certain types of care for the low-income elderly, who is eligible and what services are covered varies from state to state, and is determined by such things as income and personal resources.
"Many folks wrongly believe that letting the government pay for their anticipated long-term care needs is the best solution, but Medicaid programs are in trouble funding-wise in every state," says Wilma Anderson, a registered financial consultant. "In the future Medicaid may become even harder to qualify for. If you don't plan for LTC, you may have limited or no choices to pay for care when your health changes."
Here are four things to consider when planning for long-term care:
How will you pay the bills?: Many financial planners and elder care experts say long term care insurance is a good place to start. It typically helps pay for things that your medical insurance won't, like in-home care, or remodeling your home so you can stay in it longer. But as with all forms of insurance, it's vital do your research.
Investigate the cost of a stand-alone long-term care policy: The younger you are, the lower the premium will be. The cost really depends on factors like family health history, age, how much insurance you think you'll need, how long you'll need it, where care is received, and more, explains Marion Somers, PhD, author of Elder Care Made Easier: Doctor Marion's 10 Steps to Help You Care for an Aging Loved One.
Shop around for the best policies and prices. Benefits vary: Weigh the scope of coverage, benefit and waiting periods, inflation protection and other factors against your income and health needs.
Read the fine print: "Insurance companies may try to offer added-value features beyond the basic benefits, but most of them don't add much value at all. Be thoughtful and realistic about your needs and priorities," says Ryan Malone, founder of InsideElderCare.com.
Truthfully, says Somers, "Not everyone needs long-term care insurance, but everyone needs a plan."