Should a long-term care policy be in your future?
I’ve recently turned 50. In the spirit of celebrating that milestone, I started doing one thing new each week. (I’ve since discovered there’s a book about that.) Some of the new things I’m doing are fun (like learning how to make mozzarella) and some are not so fun. That’s because 50 is the year for some major decisions. One of those decisions is: Should I buy long-term care insurance?
While long-term care insurance decisions could never rate on the same excitement level as a special vacation or even with something relatively easy as learning to make mozzarella there are other reasons that turning 50 makes me think about long-term care insurance because not only am I 50 but I’m also single.
Being single and female is important because the majority of people in nursing homes are women. By age 65 and over, three-quarters of Americans living alone are women. The need for institutional care obviously increases if you don’t have a spouse that can take care of you if you have an unexpected health issue.
So, I’m doing things to make sure that I remain healthy but I’m also planning in case I don’t stay healthy. The thing about long-term care insurance is that the time to purchase it is when you are healthy. It might seem like a foregone conclusion that I should just buy insurance but a lot has to go into that decision. Here’s my list of pros and cons:
- I’m single. As I have already pointed out, being single increases the likelihood that I’ll need a nursing home. Just to be clear here, you could be 50 and solidly married and still find out you’re single when you are in your 70s or 80s. My singleness though has been perpetual. I’m not likely to have that change and so I should plan that it won’t. People, who are currently married, should financially plan for the surviving spouse. Just as an aside: If I did have a significant other, this is when I would be concentrating on improving my health not just for my benefit but also for my spouse’s benefit. Carriers if they do take people in poor health often charge as much as 40 percent more for premiums.
- Some people can rely on their children to care for them if they have no spouse but I’m also childless. The reason children are important is that having children increases the likelihood you’ll be able to remain at home since children (generally the daughters) are the main providers of unpaid care.
- Unmarried men are in worse shape than I am especially if they don’t have children. But, I don’t get bonus points for that because being unmarried and female means that I’m much more likely to be poorer after age 65 than my male counterparts. Poverty rates are five times higher among unmarried boomers than married boomers because dual incomes are better than one. Almost 28 percent of Americans live alone and about 7.9 million of them are older women. That’s a record number of us not taking advantage of the benefits of a shared (household) economy.
- I’m not rich but I’m also not poor. If you have $2 million in assets or more, you don’t need long term care insurance because you’ll probably be fine paying for long term care needs privately (although a policy may protect money to ensure you can leave something for your heirs). Medicaid was created for people at the other end of the spectrum. At the moment, people financial more well off can still access Medicaid benefits if they plan appropriately but government benefits are always a bit iffy since the cost of paying for those benefits will increase substantially over the next few decades and people’s patience with steadily increasing Medicaid costs are likely to run out. That leaves those of us in the middle to contemplate the benefits of a long-term care policy. With the average nursing home bill for a private room coming in at a cool $262,800 for three years of care, it doesn’t take a math genius to know that even figuring I won’t need that level of care for at least another 30 to 40 years, I had better start saving now.
- I’m only 50. Being in my 50s is the best time to consider buying a long-term care policy. Premiums are most affordable and coverage is easy because most of us haven’t developed any major long term health concerns yet. I may not need to make my decision this year but sometime in the near future it should be on my list of priorities to either buy insurance or come up with an alternative. This is partly due to the fact that carriers typically raise their premium rates for each additional year by 3 percent to 4 percent a year.
- Buying a long-term care policy so far off from when I’ll actually need it can be scary. That’s because the industry changes wildly. Insurance companies quit carrying long-term policies or they disappear or become unable to continue selling insurance in your state. If you decide to buy an insurance policy, this is not the time to give some new, upstart a shot at the big time. You want reliability, stability and a good rating of a single-A or better.
- There’s this little thing called inflation. From the standpoint of the economy, we’re all aware of it. I can remember as a kid eating Kraft Macaroni and Cheese. It was a good deal when it went on sale 10 boxes for a dollar. Have you priced Kraft Macaroni and Cheese lately? It’s not 10 cents a box even on sale. That change in price is why it’s necessary to buy inflation protection. The bad thing about inflation protection is that it cost money—insurance companies add about 50 percent or more to your premium for inflation protection.
- It’s complicated. And boy howdy is it. Families with insurance policies encounter denials that end up costing tens of thousands of dollars. You must understand how and when you can use your benefits. You must be familiar with terms and definitions. You must be aware that it isn’t the family that determines when the policy goes into place but rather a doctor, nurse or social worker must certify that the reason you are claiming long term care benefits is that the condition that makes the benefits necessary will last 90 days or longer.
- They’re expensive. Even with several types of policies available to choose from, the reality is that you can put money into the policy that you may never recover. Although that is the case with all insurance policies, it especially seems painful for a long-term care policy. You could be better off investing that same money and using the investment the way you want to use it rather than according to someone else’s list of terms. The problem with that plan is that most of us aren’t particularly good at consistently putting the money away.
- I’m female. Long-term care policies are mostly used by women (because the men receive care at home or die early) and so they are often more expensive for women than they are for men.
As you can see there are a lot of things to think about. What does your list include?
If you decide to purchase long-term care insurance, here’s an article about things to keep in mind while shopping for a policy.