Do You Need Long Term Care Coverage?

Virtus Wealth financial advisors > Do You Need Long Term Care Coverage?

by | Apr 28, 2017

Less than 8% of Americans actually have insurance for long term care.1 Moreover, only 10% of the elderly have a private long term care insurance plan, and because coverage under these plans is often limited, only 4% of long term care expenditures are paid by private insurance, while fully one-third of expenditures are paid out-of-pocket.2

Conversely, nearly 70%, almost three out of four, people age 65 and older may require long term care at some point.3

As of 2012, the average national cost for one year of care was around $76,000.4 And based on a 2014 study the average cost for both nursing home care and assisted living facilities had risen about 4% over the previous 5 years.5

Consequently, around 1.7 million American home-owners filed for bankruptcy in 2013 due to their inability to pay medical bills. Furthermore, nearly 10 million American adults, aged 19 to 64, were be unable to pay for basic necessities like rent, food and heat due to medical payments.6

What is Long Term Care?

Long term care includes a wide range of medical and support and services for people with a degenerative condition such as Parkinson’s, a prolonged illness such as cancer or a cognitive disorder such as Alzheimer’s.

Generally, a long-term care insurance policy pays benefits when it is determined by professionals that either you are unable to perform at least two of the activities of daily living, or you need continual supervision due to a cognitive impairment.

A person may qualify for long term care if:

  • For at least 90 days, the person needs substantial assistance due to a severe cognitive, physical, or chronic impairment.
  • The person is expected to require care for at least 90 days, and be unable to perform two or more of the following daily activities without assistance:
    • Eating
    • Dressing
    • Bathing
    • Moving around the home
    • Using the restroom
    • Controlling your bladder

The Sooner The Better

Making arrangements for this type of situation is going to be more expensive the longer you wait. Generally, at younger ages you are more likely to qualify for good health discounts and lower annual premiums.

This type of care can last for undetermined amounts of time, costing the victim and their family tens or even hundreds of thousands of dollars. Life-long savings and retirement funds can be threatened by the associated costs of care.

1http://www.rwjf.org/content/dam/farm/reports/issue_briefs/2014/rwjf410654

2http://www.nber.org/bah/winter05/w10989.html

3http://longtermcare.gov/the-basics/who-needs-care/

4http://www.privateportfolios.com/new/privateportfoliosinc/pdf/KiplingersValuableLessonsonLTCPlanning.pdf?advisorid=4017923

5 http://www.nahc.org/mobile/NAHCReport/nr150414_2/

6https://www.nerdwallet.com/blog/health/medical-bankruptcy/

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