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What is long-term care insurance?
Long-term care insurance is a plan that helps pay for services to assist you with everyday activities such as eating, dressing, bathing or getting in and out of bed. You select the coverage you would like to receive when you purchase the policy.
The median annual cost of long-term care insurance ranges from $44,000 to $91,250, depending on the level of care needed. Given that the average stay in a nursing home is 892 days, or 2.44 years, the cost can easily surpass $200,000.
The younger and healthier you are at the time of application, the more likely you are to qualify for long-term care insurance. Those in poor health or who are already receiving long-term care services are unlikely to get through the underwriting process, or in some cases, will be quoted a “non-standard” rate.
The best time to apply is in your mid-50s, provided you are healthy. Your health almost never improves once you reach your 50s. Even if you diet, exercise and inherit great genes, most people in their 50s face at least one or two health challenges.
A few things to keep in mind:
- Discounts are often offered to applicants in good health.
- Every insurer establishes its own requirements, so if one insurer rejects you, check another.
- Although all policies go through an underwriting process, do not assume that existing health conditions will prevent acceptance.
- The cost of long-term care insurance increases on your birthday: 2 percent to 4 percent each year in your 50s and 6 percent to 8 percent in your 60s.
Example of long-term care insurance
Rates for long-term care vary by state and premiums can go up at any time without warning. The cost of a long-term care policy in mid-2016 for a Maryland couple in their 50s was around $3,100 annually. Genworth offers a calculator that lets you plug in your state (or the state in which you plan to retire), and other information to give you a cost estimate for long-term care insurance. How much you will pay for long-term care insurance is based on:
- Your age when you buy the policy.
- How much the policy will pay per day for care.
- The length of time the policy will continue to pay.
- The lifetime maximum the policy will pay.
- Optional benefits, such as a policy that increases to keep up with the rate of inflation.
The average U.S. citizen turning 65 has a 70 percent chance of needing long-term care at some point in their life.