Long-Term Care Insurance: Why 'Putting it on Hold' Could Be a Costly Mistake
Everywhere you look, it's clear—everyone is getting older. Each day, over 10,000 people in the U.S. turn 65, more than ever before in history. With this silver wave, the number of individuals needing help with daily living activities or supervision due to conditions like dementia is soaring.
Chances are, you've considered how long-term care might affect your family and finances. Yet, like many others, you might find yourself thinking, "I'll deal with this later—I'm healthy now, and there's still plenty of time."
Putting it on hold may not only be a costly mistake but could also deeply affect your loved ones in ways you might not anticipate. Unless you've experienced the challenges of caregiving for an older family member firsthand, it's hard to imagine the emotional, physical, and financial strain it can place on those closest to you.
As longevity increases, these "gray hairs" will require care that could strain families emotionally and financially. This growing demand is why more people are exploring Long-Term Care Insurance to secure access to quality care, protect their assets and lifestyle, and reduce the heavy burden caregiving often places on loved ones.
Planning for long-term care may not be the most exciting part of preparing for the future, but it is one of the most important. Many Americans delay or avoid thinking about how they will pay for long-term care when needed, only to find themselves or their families grappling with difficult decisions later.
While it's easy to push this kind of planning to the bottom of your to-do list, waiting to address long-term care needs can lead to significantly higher costs, fewer options, and undue stress on your loved ones.
Here's why putting off Long-Term Care Insurance is a risk you don't want to take and how acting sooner rather than later can secure your financial stability, maintain your independence, and provide peace of mind for you and your family.
Rising Need for Long-Term Care
The need for long-term care is not just an issue for older people; it affects people of all ages. Accidents, illnesses, and chronic health conditions can lead to a sudden need for care services, even in younger years. However, as you age, the likelihood of requiring assistance with daily living activities like bathing, dressing, eating, toileting, personal hygiene, or mobility increases significantly.
According to the U.S. Department of Health and Human Services, about 56% of people aged 65 and older will need some form of long-term care during their lifetime. That risk increases as you age.
This reality makes planning for long-term care essential for everyone, but especially for those approaching middle age. While you might be in good health today, waiting to address your future care needs could limit your options. Long-Term Care Insurance policies require medical underwriting, meaning your current health status and even your family medical history play a critical role in determining eligibility and premiums.
Limitations of Health Insurance and Medicare
A common misconception is that health insurance or Medicare will cover long-term care needs. In reality, these programs only pay for short-term skilled care, such as rehabilitation after surgery or a hospital stay. They do not cover custodial care, which includes assistance with daily living activities. Medicaid may cover long-term care, but only for those with limited financial resources.
Without an LTC policy in place, you'll be responsible for covering the costs out of pocket. This often means dipping into savings, retirement accounts, or other assets—potentially jeopardizing your financial future and leaving loved ones to manage the logistics and emotional burden of your care.
The reality is that without an LTC policy, your family may have to take on the role of caregivers—something they are often unprepared and untrained to handle. For your adult children, balancing their own careers and family responsibilities while providing care can significantly disrupt their lives, adding emotional, physical, and financial stress.
Rising Costs of Long-Term Care
Long-term care costs are rising dramatically, and self-funding for these expenses has become increasingly impractical. According to the LTC News Cost of Care Calculator, the median monthly cost of in-home care is over $5,000, while the base cost of assisted living facilities averages more than $4,500 per month before adding surcharges that can increase that cost by as much as $2000 a month. Nursing home care can exceed $10,000 per month, depending on the location and level of care required.
Remember, the cost of care depends on factors like your location and the level of care you need. The majority of long-term care services are provided either at home or in assisted living facilities.
These costs are expected to continue climbing due to inflation, increasing demand, and labor shortages in the caregiving industry. Relying on personal savings to cover such expenses introduces a host of uncertainties, including fluctuating market conditions and the unpredictable timing and duration of care needs. Additionally, someone—often an adult child—will have to make difficult decisions about which assets to liquidate and how to manage your care.
Self-funding long-term care means relying on your own money, which can lead to higher costs due to the tax implications of liquidating assets to cover expenses. Without a plan in place, decisions about your care may fall to others, leaving you with less control over your life and future.
Importance of Acting Early
Waiting to include Long-Term Care Insurance in your retirement plan can significantly increase your premiums and limit your options. Putting this off means it costs you more to transfer the risk of long-term care to an insurance company.
LTC Insurance is more affordable when you're younger and healthier. Premiums are based on several factors, including your age, health, and family medical history. The earlier you apply, the better your chances of securing a policy with favorable terms.
Putting it off also increases the risk that a change in health could make you ineligible. Conditions like diabetes, heart disease, or even a family history of Alzheimer's can result in higher premiums or disqualification altogether. By acting now, you lock in coverage while you still qualify, ensuring protection for the future.
What Long-Term Care Insurance Offers
A well-designed LTC Insurance policy does much more than protect your assets—it safeguards your independence, ensures access to quality care, and alleviates the emotional and financial burden on your family.
The good news is that Long-Term Care Insurance is regulated by both the federal government and the states, providing you with consumer protection, regulated benefit triggers, and tax incentives.
Plus, most states participate in the partnership program that provides additional asset protection if you have a qualified Partnership Long-Term Care Insurance policy.
Here are a few things that any LTC policy that meets federal guidelines offers you and your family:
1. Guaranteed Tax-Free Benefits and Tax Deductibility
LTC policies provide tax-free funds to cover care costs, whether you prefer in-home care, assisted living, or a nursing home. This financial support ensures you can choose the type and level of care that best meets your needs without the concern of a tax bill.
Additionally, you can use pre-tax funds from a Health Savings Account (HSA) to pay for your premiums. Certain individuals may also qualify for tax deductions, particularly those operating under an LLC, partnership, or S or C Corporation.
2. Choice of Care
When you have Long-Term Care Insurance, you have control over the type of long-term care services you receive. You remain in control. While most people want to remain at home, you might prefer assisted living. You get to decide once you qualify for benefits.
3. Guaranteed Renewable for Life
All tax-qualified LTC Insurance policies are guaranteed renewable for life by law. This means that once the policy is issued, the insurance company can never cancel the policy, no matter your age or change in your health. As long as you pay the premium, you can never lose your policy unless you exhaust all the benefits from the policy. Plus, most policies will waive the premium when you receive the benefits.
4. Income and Asset Protection
Without LTC insurance, you may have to use income, spend down your savings, or sell off assets to pay for care. An LTC policy preserves your retirement income and wealth for other priorities, like leaving a legacy for your family.
LTC Insurance also includes, as an option, inflation benefits, which increase your benefits over time as the cost of care increases.
5. Reducing Family Stress
Caregiving can significantly affect family members, particularly adult children juggling their careers and families. LTC Insurance allows your loved ones to focus on providing emotional support rather than managing caregiving responsibilities or navigating financial decisions.
Many policies include case management services. A nurse case manager can assist you and your loved ones in developing a plan of care to ensure you receive the best quality care possible based on your needs and preferences. However, this is not "managed care"—you are not obligated to follow the recommendations. Instead, the case manager serves as an advisor and advocate, providing valuable guidance and support.
6. Flexibility and Customization
Modern LTC Insurance policies are highly customizable, allowing you to tailor coverage to fit your budget and needs. Working with a qualified Long-Term Care Insurance specialist, you decide the amount of money you will have to pay for care.
There are many available options, including hybrid policies that combine LTC Insurance coverage with life insurance or annuities, providing additional financial flexibility and a death benefit.
Cost of Waiting
The longer you wait to secure Long-Term Care Insurance, the more expensive it becomes. On average, premiums increase by 3% to 4% each year you delay.
Beyond financial considerations, waiting also increases the risk of being denied coverage due to health changes. Even a minor health issue can complicate the underwriting process, leaving you with fewer options or forcing you to self-fund your care entirely.
In fact, a study done by the American Association for Long-Term Care Insurance indicated that over 30% of those over age 60 were declined for coverage due to health. This number rose to 38% at 65 and 47% at 70.
Planning for Peace of Mind
Long-Term Care Insurance isn't just about preparing for needing care—it's about ensuring peace of mind for you and your family. With coverage in place, you'll have the freedom to focus on enjoying your retirement years, knowing you're protected against the high costs and uncertainties of future care needs.
Take advantage of your current good health to explore your options and secure a policy that meets your needs. Work with a qualified LTC Insurance Specialist who can provide accurate quotes and guide you through the process of selecting the right coverage and the application process.
Time to Act is Now
Delaying your decision to purchase Long-Term Care Insurance is a gamble that could cost you more than just money—it could jeopardize your independence and place undue strain on your family. By planning ahead, you gain financial protection, access to quality care, and the reassurance that your loved ones won't have to bear the emotional and logistical burdens of caregiving.
Don't put the decision of acquiring an LTC policy off. The earlier you act, the more options you'll have and the less you'll pay in premiums. Don't wait until it's too late. Take control of your future today by exploring Long-Term Care Insurance and ensuring a secure, comfortable retirement for yourself and peace of mind for your family.
When you meet with a qualified LTC Insurance specialist, you will learn about your options, discover what health insurance and Medicare will cover, and get accurate quotes and recommendations from all the top-rated insurance companies that offer long-term care solutions.
It does not mean you have to buy anything, but it starts with education. LTC News provides many resources to help you learn about long-term care planning and will help you ask the right questions.
However, a real LTC Insurance specialist will ask you many questions about your health, family health history, finances, your family, and retirement plans so they can provide you with the right information.
LTC News has prescreened LTC Insurance specialists to provide you with this information. You can rely on LTC News Trusted LTC Insurance Specialists when you seek accurate quotes. These LTC News trusted partners are professionals who are screened by LTC News and hold the esteemed CLTC designation, are endorsed by the American Association for Long-Term Care Insurance (AALTCI), and come highly recommended as Ramsey Trusted Pros by financial expert Dave Ramsey's organization (Ramsey Solutions).
Insurance products are regulated, and working with a specialist won't cost you money, although they can save you money by matching your age, health, and other factors with the right coverage at the lowest cost.
Don't delay and put off learning about your options.