5 Ways Long-Term Care Insurance Can Protect Your Assets

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  • Paying for long-term care can be prohibitively expensive.
  • Purchasing a long-term care insurance policy when you're relatively young helps keep the premiums low.

There's no time like today to protect your estate from future expenses.

Regret is like a bully, peppering you with "what ifs." While you can't avoid regret entirely, you can minimize its cruelty by making the best decisions possible with the information you have at hand.

Want to avoid the regret of not protecting your estate? A long-term care (LTC) insurance policy can help. And if you think you're too young to worry about long-term care, you may want to rethink your position. The younger you are, the less you'll pay to protect your assets.

Stick with us here as we outline how planning now can preserve the wealth you accumulate throughout life.

Five ways LTC insurance can protect your health, assets, and family

  1. Since an LTC policy pays for help with everyday activities, you won't have to pull money from your bank account to pay for assistance.
  2. Having an LTC policy means keeping up with your medical care because you know you can afford whatever arises.
  3. An LTC policy takes the weight of worry off your family, knowing you can pay for care.
  4. LTC insurance can make the difference between spending down your assets to meet Medicare eligibility requirements and leaving money behind for your heirs.
  5. An LTC policy can minimize the anxiety sometimes associated with aging.

What is LTC insurance?

LTC insurance is designed to help pay for the services and support you may need as you age. An LTC insurance policy pays a daily amount, up to a specified limit. According to Genworth Financial, the average cost of care in 2021 was as follows:

Type of Care Average Monthly Cost
In-home homemaker services $4,957
In-home health aid $5,148
Community adult day healthcare $1,690
Assisted living facility $4,500
Nursing home - semi-private room $7,908
Nursing home - private room $9,034
Data source: Genworth Financial

Let's say you need an in-home health aid for six months as you recover from major surgery. That alone would cost an average of nearly $31,000. Having an LTC policy in place can mean the difference between draining your bank account to pay for care and maintaining a comfortable lifestyle.

How does LTC insurance help?

An estimated 7 out of 10 Americans will require some level of LTC during their lifetime. It may be for a brief period, like recovering from hip surgery. Or it may last for years, like Alzheimer's care. Medicare covers 100 days of skilled nursing care or a rehabilitative stay, but nothing beyond that. And Medicaid (the federal and state program that helps pay medical costs for people with limited resources) only kicks in when a person is down to $2,000 or less in assets. Until that time, they are solely responsible for paying for LTC.

And that's where LTC insurance comes in. LTC coverage pays for more than nursing home care. It also covers help with Activities of Daily Living (ADLs), including:

  • Dressing
  • Transferring from one place to another (like from a bed to a bathroom)
  • Bathing
  • Eating and drinking
  • Incontinence issues

LTC insurance also pays for practical assistance, called Instrumental Activities of Daily Living (IADLs). These include:

  • Grocery shopping
  • Organizing and taking medications
  • Housekeeping
  • Pet care
  • Money management

In a nutshell: An LTC policy helps those with serious medical issues as well as those who simply need an extra set of hands to help out until they're back on their feet.

READ MORE: Why Retirees Should Be Worried About Rising Housing Costs and What They Can Do

How much does LTC insurance cost?

To give you a sense of how much an LTC insurance policy costs, here are the averages for a 55-year-old male and female purchasing a policy with a $164,000 initial benefit (the value increases annually). Both are in good health and standard rate.

Policyholder Age Average Annual Cost
Male 55 $1,700
Female 55 $2,675
Couple Both 55 $3,050
Data source: AALTCI.org.

The younger you are, the less you'll pay for a policy. Other cost factors include:

  • The maximum a policy pays per day
  • The maximum number of years a policy will pay
  • Optional benefits, such as inflation protection

If we're fortunate enough to get old, planning in advance for any care we may need frees us up to focus on other things -- like learning to mountain climb or ski jump. It also provides the kind of peace of mind that can't be measured in dollars and cents.

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