Can You Afford It?
Perhaps the better question is whether you can afford not to have one.
According to the Department of Health and Human Services, the average cost of nursing home care in
the United States is about $100 per day, and the average stay is 2½ years. This translates to a
total cost of about $100,000 per stay!
Home Health Care costs can vary greatly depending on the type of care you receive. They are frequently
even more expensive than Nursing Home Care. More and more people are using Home Health Care rather than
going into a nursing home for short duration convalescence.
Long term care insurance can prevent you from having to face the prospect of covering these expenses
with assets which you've worked a lifetime to acquire.
What about Medicare and Medicaid?
It is a common misconception that Medicare and Medicaid will cover the costs of long term care. The
reality is that the percentages each source contributes to the costs of long term care today is:
This leaves you responsible to pay for the other half of the expenses, - $50,000 on average, based
on the Department of Health and Human Services statistics above.
Click here for more information about Medicare and Medicaid roles in long term care.
What protection is needed?
With the possible financial risk of not having coverage, long term care affordability is a matter of
fitting the premiums into your budget. Choosing from a variety of plans, and personalizing the plan you
choose by manipulating the plan parameters, yields a large degree of flexibility where your cost is concerned.
The following parameters play a key role in determining the cost for your coverage:
- Benefit Period
Policies that will pay for a nursing home confinement vary in length from a minimum of 1 years to 5 years
and even a lifetime. How do you select the one that is right for you? Here are some guidelines.
Consider your sex. Women statistically live longer than men. Therefore a 4-year policy may be more
appropriate for a man, but not long enough for a woman.
Consider your family's longevity. If your relatives all lived to ripe old ages, chances are good you
will, too. Perhaps a lifetime plan is worth considering.
Consider your age. If you are in your 50's or 60's, definitely consider the lifetime plan, since the
difference in premium between a 4 year and a lifetime policy may not be significant at those ages. If
you are in your 70s, then a 4 year plan may be sufficient.
Other factors to consider:
If you want to be covered for illnesses such as Alzheimer's Disease, which often require the need for
long term care or a nursing home stay of many years, a lifetime plan is suggested. Because the average
nursing home stay is 2½ years (Source: Department of Health and Human Services, 1991), it is wise
not to purchase a policy of less than 4 years; a 3 year benefit may be cutting it too close.
- Daily Benefit
Policies pay daily benefits that typically range from $40 to $300. Nationally, the average cost of a nursing
home stay is around $100 per day(Source: Department of Health and Human Services, 1991). In some areas,
especially in and around large cities, costs are usually higher.
To choose a daily benefit, we recommend that you first find out what daily rates at local nursing homes
are running. Then, choose a daily benefit which closely matches your local nursing home costs. We recommend
a daily nursing care benefit of at least 66% to 80% of the prevailing daily rate in your area.
It is not necessary to insure 100% of the risk. To hold down premium costs, you can assume part of
the risk yourself. For example, if nursing home rates are $120 per day in your area, take a policy for
$100 per day.
- Elimination Period (Waiting Period)
With many policies, you can decide how soon after entering the nursing facility your benefits will begin:
immediately, 30 days later or 90 days later. As a general rule, the longer the waiting period, the less
expensive the policy.
Keep in mind that if you are buying a policy at a relatively young age, there may not be much difference
in cost between a shorter and longer deductible.
- Home Health Care Protection
Everyone wants to stay at home as long as possible. But in order to receive quality care at home, you
need to have a solid support system. Under home health care, a home health care aide may care for you
up to 8 hours a day; your primary caregiver, such as a spouse or a child, may end up caring for you the
remainder of the time.
The question to ask is, in the eventuality of receiving home health care, will you need an aide for
a full 8 hours, or for just a few hours to offer your spouse or child a break.
- Inflation Protection
As health care costs, fueled by inflation, increase, it is important that benefits keep pace with nursing
home costs. For an additional premium, a number of policies include Inflation Protection which offers
a 5% annual increase in benefits.