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Long-Term Care Insurance: What Is It And Do You Need It?

Jamie Johnson4-minute read
February 03, 2022

Aging is inevitable, but many people don’t consider how they’ll support themselves later in life. Your retirement savings alone may not be enough, especially if you have a chronic health condition that causes you to be unable to live on your own.

This is where long-term care insurance can be helpful. Nobody likes to imagine that they could eventually reach a point where they can’t take care of themselves. But the reality is, 52% of individuals turning 65 will need some type of long-term care in their lifetime.

It’s just as important to buy long-term care insurance as it is to purchase life insurance or homeowner’s insurance. This article will explain what long-term care is and who needs it. That way, you can adequately prepare and make smart financial decisions for your future.

What Is Long-Term Care Insurance, And Who Needs It?

Long-term care insurance is one of the best ways to protect yourself because it provides you with income when you’re physically incapable of caring for yourself. This income can be used to pay for services that health insurance won’t pay for.

These services include things like nursing home care, home health care, and more. Long-term care insurance ensures you get the services you need without draining your financial nest egg in the process.

Over 8 million Americans have long-term care services, but this figure is surprisingly low when you think about how many people will need it. Consider the following statistics about long-term care usage:

  • 47% of men age 65 and older will need long-term care insurance at some point
  • 58% of women age 65 and older will need long-term care insurance at some point
  • Men use long-term care insurance for an average of 1.5 years
  • Women use long-term care insurance for an average of 2.5 years
  • 14% of individuals will use long-term care insurance for over 5 years

How Expensive Is Long-Term Care Insurance?

The amount you pay for long-term care insurance will depend on your age, gender, the amount of coverage you’re requesting, and the insurance company you use. In general, women can expect to pay more than men, and premiums are lower for married couples than individuals.

According to the American Association for Long-Term Care Insurance, a 55-year-old male can expect to pay $1,870 in premiums. In comparison, a 55-year-old female can expect to pay $2,965 in premiums. For a couple, both aged 55, the combined cost would be $3,000.

If those figures sound pricey to you, then this is understandable. But keep in mind, long-term care insurance is tax-deductible. And the tax benefits become much more substantial after the age of 60.

According to the IRS, individuals who are over the age of 60 can claim $4,220 in deductions. Individuals over the age of 70 can claim $5,270 in deductions. 

And if you’re trying to save money, then it may not be necessary to purchase 100% coverage. Figure out how much income you can expect to receive from Social Security and your retirement savings.

From there, you can purchase enough long-term care insurance to cover any financial gaps. You can also check with your employer to see if they offer a long-term care insurance plan.

At What Age Should You Buy Long-Term Care Insurance?

Buying long-term care insurance is a personal decision, but there are a few things you should keep in mind. First, you don’t want to make the mistake of waiting too long.

If you wait until you’re in your 60s to try to purchase long-term care insurance, then it may be harder for you to qualify. According to the AALTCI, 46% of individuals age 50 – 59 qualified for long-term care insurance.

In comparison, only 38% of individuals age 60 – 69 qualified. In general, the younger and healthier you are, the easier it will be to qualify for long-term care insurance.

The AALTCI recommends you begin thinking about long-term care insurance in your mid-50s. By doing this, you’re more likely to qualify and can prepare for potential health changes in the future.

What Is Long-Term Care Insurance Used For?

At this point, you may be wondering what long-term care insurance covers. These plans will typically cover the following expenses: 

  • In-home care
  • Nursing home care
  • Alzheimer’s care facilities
  • Home modification
  • Care coordination
  • Adult daycare centers
  • Hospice services

All of these long-term care costs are unlikely to be covered by traditional health insurance plans or Medicare. Long-term care insurance can ensure that you receive the care you need, and don’t have to drain your retirement savings in the process.  

However, don’t forget about the long-term care elimination period. Most plans will come with a waiting period, which is the number of days you’ll pay for the insurance before being eligible to receive coverage. For most plans, the waiting period is 90 days.

Do I Need Long-Term Care Insurance?

Long-term care insurance costs quite a bit of money, so it can feel unnecessary to some people. After all, you may never need to go to a nursing home or use hospice services.

But you may find that the peace of mind you receive is worth paying a few thousand dollars a year. After all, you also may never get in a car accident, but I’m willing to bet you buckle your seatbelt every time you drive somewhere.

Long-term care insurance is one of the best investments you can make in your health and personal finances. With long-term care insurance, you’re protecting your retirement savings while ensuring that you can have access to necessary medical care.

To get started, you’ll need to figure out what kind of coverage you’ll need. From there, you can shop around at different insurance companies and find the plan that’s best for you.

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Jamie Johnson

Jamie Johnson is a Kansas City-based freelance writer who writes about a variety of personal finance topics, including loans, building credit, and paying down debt. She currently writes for clients like the U.S. Chamber of Commerce, Business Insider, and Bankrate.