Long-Term Care Insurance: What You Need to Know

It’s more valuable than you may realize

Have you ever considered what you would do if you were diagnosed with a chronic health condition or disability requiring daily care?

Nearly 70% of 65 year olds will need long-term care services or support. From this age group, women typically need care for about 3.7 years, while men require it for 2.2 years.1

Remarkably, while chances are good that we (or our spouses) eventually might need help with long-term care, many people reach that stage only to discover they cannot afford to cover those costs out of pocket.

Others, however, start planning for the possibility years before, through a combination of strategies: saving money, investing wisely and buying long-term care insurance to help defray costs.

What is long-term care insurance?

Do you or your spouse have a family medical history that includes certain health conditions? Are you concerned about the costs of long-term care later in life? If so, a long-term care insurance policy can provide peace of mind.

Think of the assistance you might need in the future with typical daily routines: eating, bathing, dressing or getting in and out of bed. As tempting as it may be to rely simply upon a spouse or adult child for help, many people cannot care full-time for an adult — especially someone in failing health. Even well-intentioned loved ones may find the realities for deep caregiving a larger task than they imagined.

So, what about hiring someone to help out? If you do the math on what it would take to cover round-the-clock care over a few months or several years, you’ll see those numbers can run up fast. Alas, most traditional employer-based health insurance plans won’t cover extended daily care, only doctor and hospital bills.

That’s why so many people opt to purchase insurance to cover long-term care. Such a policy can help cover costs related to nursing, home health care and daycare for those who have reached 65 years of age and who have been formally diagnosed with a chronic medical issue, a disability or another condition like Alzheimer’s disease requiring significant care.

Unlike traditional health insurance, long-term care insurance typically covers personal and custodial care you can receive in your home, a community organization or other licensed care facilities.

How does long-term care insurance work?

If you are granted coverage (we have a "word of caution" later in this article), a long-term care policy would reimburse a daily amount (up to a pre-selected limit) for caregiver services to help the policyholder with daily activities like bathing, dressing or eating.

Once your health status qualifies you for long-term care services, your policy will reimburse you depending on the care options and benefits you pick to get the services you need — where and when you need them.

Long-term care insurance covers more than Medicare

Depending upon your diagnosis and overall health, Medicare may pay for skilled care in a nursing home for short periods (up to 100 days). It may also pay for limited amounts of home health care when you require skilled nursing or rehabilitation.

However, that’s not the same as providing long-term support for your daily needs.

Let’s say you have a significant illness or injury and are hospitalized for a long period. Once you’ve made some progress and your doctor sends you home, you might be unable to live alone without help. Odds are good that you’ll have to pay for that kind of long-term care yourself. If you don’t have insurance to cover it, the bill could become very expensive. And if both you and your spouse were to become ill in rapid succession or simultaneously, costs could become exorbitant.

Granted, some people may be eligible for additional assistance through Medicaid — the federal and state health insurance program for low-income individuals. But to qualify for Medicaid, both your income and the value of your other assets must fall below certain limits, which vary from state to state.

Is a long-term care policy right for you?

There’s the cost of the policy to consider, of course, when deciding if a long-term care insurance policy is worth the investment. That price is usually determined by:

  • Your age when you buy the policy
  • The maximum amount a policy pays daily
  • The total length of time that a policy will pay for care
  • The maximum lifetime amount the policy will pay (maximum amount per day times the total number of days)
  • Any additional benefits you choose, such as benefits that increase with inflation

Other personal considerations include:

  • Who will help care for you (and your spouse) should you need long-term care?
  • Are you concerned about possible changes in your or your spouse’s health status in later life?
  • Will you be caring for children in your 50s and beyond? Responsible for an elder parent(s)’ care?
  • Can you afford to pay for extended home care for yourself or your spouse?

Consider long-term care costs as part of your long-range financial planning

Long-term care insurance can be a big part of your long-range financial planning, especially after you reach your 50s. Many people with long-term care insurance opt to buy it in their mid-50s to mid-60s, noting that long-term care insurance carriers won’t approve applicants over 75.

A word of caution: You likely won’t qualify for long-term care insurance once you’ve been diagnosed with a debilitating condition. Most policies require a medical exam to assess your health before they will grant coverage.

Buying long-term care insurance, sooner rather than later, may help position you to secure some necessary, quality care resources down the road, when you and your family need it most.

Curious to learn more about your long-term care insurance options? Contact the RBFCU Investments Group at 1-888-294-0202 or via rbinvestments@rbfcu.org for a no-cost, no-obligation initial appointment.

Investment products are not insured by the FDIC, NCUA or any federal agency, are not deposits or obligations of, or guaranteed by any financial institution, and involve investment risks including possible loss of principal and fluctuation in value.

Ameriprise Financial Services has a partnership with this financial institution to provide financial planning services and solutions to clients. The financial institution is not an investment client of Ameriprise but has a revenue sharing relationship with us that creates a conflict of interest. Details on how we work together can be found on ameriprise.com/sec-disclosure.

1How Much Care Will You Need? (n.d.) Retrieved September 16, 2022, from acl.gov.

Before you purchase long-term care insurance, be sure to consider the policy’s features, benefits, risks and fees, and whether it is appropriate for you, based upon your financial situation and objectives.

All guarantees are subject to the claims paying ability of the issuing insurance company.

RBFCU Investments Group is a financial advisory practice of Ameriprise Financial Services, LLC.

The initial consultation provides an overview of financial planning concepts. You will not receive written analysis and/or recommendations.

Investment advisory products and services are made available through Ameriprise Financial Services, LLC, a registered investment adviser.

Securities offered by Ameriprise Financial Services, LLC. Member FINRA and SIPC.