We need to talk about long term care insurance

I’m apparently on an insurance kick these days. Maybe it’s because I’ve had to file a car and home insurance claim in the past month. As annoyed as I am, at least I have insurance. It would be a lot worse if I didn’t. The same could be said of long term care insurance. I seriously hope I don’t end up unable to accomplish basic human functions on my own, I mean, don’t we all? But I just don’t know for sure I won’t. The unknown is why I purchase any insurance, and how long I live and how healthy I’ll be is a big unknown.

Let’s start with some basic questions.

What is long term care?

“Activities of Daily Living (ADLs) are the standard litmus test for required care. For instance, if you can’t bathe, feed, dress, or transport yourself, then you are likely to need organized assistance. A long term care insurance policy will help pay for your care when you can’t perform two or more ADLs (depending on the policy). However, if you don’t have a long term care insurance policy, you will need to pay for your own care.” (courtesy of the Indy Star)

Can you pay for long term care without insurance?

“Nursing care, in-home care, or adult day services, are not cheap. It’s not unusual for a one year’s stay in a long term care facility to cost you $60,000. A three-year stay, with constantly increasing costs, will cost you around $200,000. Long term care insurance would mitigate these costs, and in turn, protect your assets. And while protecting your assets might not seem like a priority compared to your health, protecting your assets is essential, if you have a significant other that currently doesn’t need elder care. Long term care insurance pays for your stay and protects your assets…so that your partner doesn’t run out of money. If your assets are needed to fund your stay, then what is the person at your home supposed to do? How are they able to financially survive when your joint assets are being used to pay for terribly expensive care?” (courtesy of the Indy Star)

The fact is often family steps in to foot the bill, but at what cost? Sure your care may be taken care of, but what about their retirement fund and your grandchildren’s college funds? Using family as a financial back-up plan is never a good idea. Beyond that, Medicaid is an option, but it is absolutely the last resort because it means all your assets are depleted.

Long term care insurance isn’t something you need to worry about until you are in your 50s. Your 50s is the right time to buy long term care insurance because you’ll likely still be healthy. Long term care insurance works like life insurance, the younger and healthier you are, the better your rate. For most people, the 50s are their prime earning years, which means adjusting to a new premium should be a breeze.

The idea of another insurance premium isn’t appealing to anyone, but the alternative is worse. Like most insurances, foresight is required. Is fronting money now worth avoiding major financial issues in the future? You have to ask yourself the question, but in the case of long term care I’ll personally always answer YES.

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