Exploring long-term senior care insurance

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Long-term care insurance can help protect retirement dollars by paying for skilled nursing homes or home health aides.

Individuals plan for many different scenarios: buying a home, putting kids through college and saving for retirement, among others. 

Quite often, the concept of making arrangements for one’s golden years is placed on the back burner. However, that can be an expensive mistake.

According to the American Association of Retired Persons (AARP), by the time a person reaches age 65, he or she has a 50-50 chance of needing long-term care at some point in the future. Medicare, the federal health insurance program for people who are 65 or older in the U.S., does not cover custodial care, which is the primary form of care in nursing homes. Therefore, many people must find alternative ways to finance nursing homes and other long-term care options. Those who must pay out of pocket spend an average of $85,000 per year on a nursing home in the U.S., and this is often an expense that has not been included in retirement budgets.

Long-term care insurance can be the best option to offset the high costs of care in most instances. It helps cover the costs of services that aren’t covered by regular health insurance, namely assistance with routine daily activities like bathing, dressing or getting in and out of bed, advises the financial resource NerdWallet. Such care may be administered at home by a private health aide or in a skilled nursing facility. Most policies also will reimburse for services rendered in an assisted-living facility or an adult day care center.

According to a study revised in 2016 by the Urban Institute and the U.S. Department of Health & Human Services, about 14% of people age 65 and older will require care for more than five years. Getting the facts about long-term care insurance can help individuals make important decisions for their futures.

The earlier a person buys a long-term care insurance policy, the lower the rates tend to be. The American Association of Long-Term Care Insurance notes a 65-year-old couple can typically buy a policy for $4,800 per year to offer base benefits of $180,000 plus 3% inflation growth. That plan price more than doubles if purchased at age 75.

Cost also is based on the maximum amount the policy will pay per day and the number of years the policy will pay. Many policies limit how long or how much they will pay, some between two and five years, states the Administration on Aging. 

Policies require some medical underwriting, so not everyone will qualify.

AARP suggests seeking out an independent agent who sells policies from multiple companies rather than a single insurer.

Long-term care insurance can be an effective way to pay for the high cost of skilled nursing care.