Should I buy long term care insurance or self-insure for long-term care expenses?
Your odds of needing long term care are worrisome. According to the United States Health, 70% of Americans 65 and above will require some form of long-term care. On top of that, the rising cost of long term care can also create financial problems for you in the future.
Having insurance that will help pay for home care, nursing home, assisted living facility and other types of long-term care facilities is the traditional way of handling expensive care expenses. To give you an idea the estimate daily and the monthly cost of long-term care services are as follows:
• $275 per day or $8,365 monthly in a private room in a nursing home.
• $242 per day or $7,362 monthly in a semi-private room in a nursing home.
• $127 per day or $3,863 monthly in an assisted living facility.
• $72 per day or $1,563 monthly in an adult health care.
• $139 per day or $4,222 monthly for home health aide.
• $135 per day or $4,114 monthly for homemaker services.
Self-insuring is another viable solution to pay for long-term care. However, this is a risky choice even for affluent individuals due to the inflation of long term care costs and other retirement expenses.
So, how can you determine what’s the right long term care payment option for you? Here’s a quick guide that can help you make a tough choice between buying long-term care insurance or self-insuring.
1. Don’t Make Assumptions
The decision to self-insure should not be based on mere assumptions only. Some people with $1 million or more retirement savings are quick to assume that they are better of with self-insuring without understanding the true cost of long-term care and its impact on family members.
If you don’t take the initiative to talk to a professional about these assumptions, you might end up outliving your retirement savings or worse becoming a burden to your family.
2. Determine your Capacity to Pay for Long-Term Care
Your income is a more reliable indicator that you can afford to pay for long-term care out-of-the-pocket. Although you can sell your assets like real estate and other investments, you can take a substantial loss for selling due to tax consequences. Also, this creates a ripple effect and puts your retirement income in jeopardy.
3. Consider the Cost of Long-Term Care
The cost of long-term care varies depending on the state where you live in and the level of care you need. In general, long term care costs are expensive but there are certain states that offer affordable long-term care facilities. For example, in Oklahoma, the annual average cost of a semi-private room in a nursing home is $53,655 while a private room costs $63,510. Check out this infographic to learn more about states that offer cheap long-term care.
Paying for long-term care out-of-the-pocket plus your other financial obligations can be challenging. Considering other ways to pay for long term care like by buying long-term care insurance is a good idea to lighten your financial load.
4. Evaluate All Your Options
If you’ve decided that self-insuring will not work for you, it’s time to evaluate your options.
Traditional Long-Term Care Insurance – is a type of insurance that helps pay for different types of long-term care facilities like nursing homes, assisted living facilities, CCRCs and more. It provides comprehensive coverage, offers affordable premiums when you buy early, protects your family from devastating cost of care and gives you peace of mind.
LifeInsurance with Long-Term Care Rider – is a type of hybrid insurance that provides a death benefit and long-term care benefit. However, upfront premiums are higher and long term care benefits are limited compared to traditional long-term care insurance.
Have You Made Up Your Mind?
Choosing between buying long term care insurance and self-insuring is not just based on assumptions. You need to consider different factors such as the cost of long term care and your capacity to pay for care costs.
If you decide to buy coverage for long term care, make sure to do it early to save on premiums and to maximize your policy. You can also compromise by buying long-term care insurance with two or three years worth of coverage, then pay out-of-the-pocket when your benefit period is over.