Many people worry about how to pay for long-term care costs in retirement. Nursing homes in North Carolina cost more than $75,000 per year, and there are very limited ways of getting help to pay for in-home care. One option if you are healthy is to leverage your investments by purchasing insurance to help cover the cost of care, either at home or in a facility.
An advantage of insurance for long-term care is that the policy can pay benefits for home care and assisted living, in addition to nursing home care. You need to start looking at policies while you’re healthy enough to qualify, and the rates go up as you get older.
The biggest problems with traditional long-term care insurance (where you pay a premium until if and when you start claiming benefits) is cost. For many people the premiums are not affordable, and the insurance companies also retain the right to increase premiums over time. If you’re considering traditional long-term care insurance, find out the insurer’s history for increasing premiums. We’ve seen some clients who brought in letters from insurance companies announcing a rate hike of 40% or more…that was an unwelcome surprise to them!
The other problem with long-term care insurance is that people often wait too long before looking for coverage. By that time they are uninsurable due to health problems. The solution to that is to make your decision about long-term care insurance while you’re young and healthy enough.
Another reason people don’t purchase long-term care insurance is that they don’t like the idea of paying for the premiums for many years, and then they don’t get anything back unless they have a long nursing home stay. If a person pays premiums on a traditional long-term care insurance policy and then dies without going to a nursing home, or is in a nursing home for only a few months then they get nothing in return for their investment.
There are alternatives to the traditional long-term care insurance, that can help address some of these concerns. Assuming that you’re healthy enough, a life insurance based policy with a long-term care rider might make sense. These policies insure that you’ll get something back on your premiums. If you die without ever needing long-term care, your family will get the death benefit. On the other hand, if during your lifetime you need long-term care then the policy will pay out benefits each month to cover your costs. Depending on the policy, you can either get a benefit of 3 or 4 years, or for life. If you only received benefits for a few months or a couple of years, then whatever is still left on the death benefit (after deducting the payments for long-term care), will go to your family.
The other advantage of this type of life insurance policy is that the premiums are guaranteed, unlike traditional long-term care insurance.
Of course, you still have to be healthy enough to qualify for insurance, and the younger you are, the less the insurance will cost (which means you can get more insurance for the same money, at a younger age).
Be sure to understand the policy you’re considering, and work with a trusted advisor who understands these policies and the devastating impact of long-term care costs on seniors in North Carolina.