According to the AARP, 49% of men and 64% of women now 65 years of age will eventually need care in an assisted living facility, a nursing home, or their own home.1 And according to an ASHA report, the average length of stay in assisted living facilities is 28 months, but seniors fall well outside the average on either side.2 Would it be smart to purchase long-term-care insurance?
After all, assisted living in California can cost as much as $110,000 annually (the average is $63,000).
Still, long-term-care (LTC) insurance has a hefty premium. What if I never require long-term-care? If I’ve planned well for the future, I can probably afford to pay for care out of my own pocket. The Nat’l Association of Insurance Commissioners advises LTC coverage only if its cost is less than 7% of one’s income—and if you can pay the premium were it to go up by 25 percent (raises are frequent).3 Personal finances will clearly enter into the decision.
So, how much does it cost? The New York Times—drawing from data by the American Association for Long Term Care—reports that a 60-year-old man buying a $165,000 policy in 2023 would pay about $2,585 annually for a policy allowing for a 3% annual increase to account for inflation. For the same policy, a woman would pay $4,450 as women typically live longer and require care for a longer period.4 However, policy costs are contingent on multiple factors (e.g., age, state of health, and place of residence). Equally, benefits vary among carriers: which services are covered, the amount paid out for types of services (e.g., home aide or skilled nursing), and when you can tap into the policy (usually when you can no longer perform activities of daily living).
An AARP overview of long-term-care suggests talking with agents authorized to sell policies from multiple companies and with financial advisers who can frame options in the context of your financial plan. You may want to consider a hybrid life and LTC insurance or life insurance with LTC rider, among other options. “It’s really valuable to have some sort of third party who doesn’t have a vested interest in any one insurance company helping you navigate the process,” says Morningstar Director of Personal Finance, Christine Benz.5
- https://www.aarp.org/caregiving/financial-legal/info-2021
- https://ashaliving.org/product/2009-overview-of-assisted-living/
- https://content.naic.org/sites/default/files/publication-ltc-lp-shoppers-guide-long-term.pdf
- https://www.nytimes.com/2023/11/22/health/long-term-care-insurance-explained.html
- https://www.aarp.org/caregiving/financial-legal/info-2021
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