Do You Know How Much Long-Term Care Will Cost You?

You might need to sit down for this one.  Ever since the Obama Administration announced that the CLASS program for long-term care is being cancelled, we’ve been getting questions from seniors and their children asking whether now is the time to start thinking about private long-term insurance again. Even though CLASS was not designed to replace other long-term care programs such as private long-term care insurance or Medicaid, many people were thinking of CLASS’ relatively modest benefit of approximately $75 per day as a long-term bridge to help seniors stay their own homes and communities as long as possible. Without that bridge, families are asking themselves whether it’s time better to start buying a long-term care insurance policy sooner rather than later.

Well, if you’ve started thinking about how much it’s going to cost to fund that long-term care yourself,  sit down and hold onto something.  In 2010, the approximate cost of nursing home care was over $83,000 per year for a private room, $75,000 for a semiprivate room and $40,000 per year for care in an assisted living facility (for a one-bedroom unit), while home health aides charged $21 per hour.

And if you think that Medicare is going to pick up the check, think again! Medicare does not cover long-term care. The only government option for long-term care is Medicaid and that is only if you spend down your assets. Not a very appealing option!

Which leaves the question of long-term care insurance. Long-term care insurance isn’t necessarily for everyone. If you have the resources to pay for 4 years of long-term care on your own, it may make more sense to self-fund your long-term care. But if not, if you have started considering private health insurance for yourself or your parents, here are some important things to think about:

Remember, the policy is long-term both for you and your insurer. It is very important to consider the stability of both the insurer and the policy’s premiums over the long-term before you put your money down on a policy.

In addition, we do suggest that you not buy a long-term care insurance policy until later in life. Many insurance agents will begin pushing the hard sell to buy a policy as early as 40, but it really doesn’t make sense for most people unless you have a chronic condition that may require earlier care. Although premiums are lower the younger you are when you first purchase the policy, buying that early will most likely result in decades of payments before you have any need to call upon your policy. As you can see, your premiums could be rising for decades before your ever need the policy, and if your insurer ends up pricing your premiums to a point you can’t afford them any more, you could end up in deep doo-doo.

Also, a long-term care insurance policy purchased too early may not cover new models of care that are likely to develop in the interim. For example, many long-term care insurance policies which were purchased 20 years ago did not cover the expenses of assisted living facilities, because those facilities did not develop until relatively recently. Buying a policy only 5 or 10 years ago may result in higher premiums, but it’s much more likely to give both you and your insurer a realistic idea of the costs of your long-term care and the long-term care that you need.

Have your bought a long-term care insurance policy? Tell us about it!

Related posts:

1. Long-Term Care Awareness Month: Have You Talked to Your Mother About Her Long-Term Care?
2. Will Long-Term Care Insurance Go the Way Of the Dodo? How You Can Prepare Yourself For Long-Term Care
3. CLASS Program Gone: 3 Secrets to Picking Long-Term Care Insurance
4. Are You Being Realistic About How Much Long-Term Care Will Cost? 3 Tips On Moving Your Parent Into An Assisted Living Facility
5. Are You Being Realistic About How Much Long-Term Care May Cost? 3 Tips For Helping Your Parents Move Into an Assisted Living Facility