My husband and I are struggling to decide whether or not to buy long-term-care insurance. He is 59 and I am going on 58, so we feel we need to decide now. The problem is that it seems earlier policies were way underpriced, so now few companies are left in the business and premiums are super high, at roughly $100,000 each for guaranteed premiums or $6,500 a year for life for a joint policy with the possibility of rates being raised. (Current long-term-care insurance sellers say price increases should be few because policies are now priced right and we should have fewer problems with future claims being accepted, but who really knows?)
On the other hand, going without long-term-care insurance seems risky, with current long-term care in our area costing an average of $60,000 a year for assisted care and $100,000 a year for skilled nursing, and would expect costs to keep rising faster than inflation and with baby boomers likely to push up the demand.
Thanks in advance for any advice/input.
Planning for healthcare and long-term care are tough tasks, but absolutely necessary, so it’s great you’re taking the initiative.
As you are clearly aware, this type of coverage is not cheap, nor is long-term care itself, or most health bills in retirement, for that matter. You’re not wrong to weigh the options of going with long-term-care insurance or not — you just have to look at your personal finances closely and make a plan for either route.
For example, if you chose not to get long-term-care insurance, how are you prepared for these needs in the future? Can you pay for it with whatever you’ve saved for retirement, plus any pensions, Social Security or other sources of retirement income? How are you invested, if you are, and are you following the best strategies and practices so that your money lasts as long as you live?
Seven out of 10 people will need long-term care at some point in their lives, according to a 2021 Genworth “Cost of Care” survey. A home health aide cost an average of about $62,000 a year in the U.S. in 2021, whereas an assisted living facility is $54,000 a year and a private room in a nursing home is more than $108,000. These figures are per year…that adds up if you’re living in a facility for a couple or more years.
Just a quick note for readers not familiar with long-term care: this is different than healthcare, which can pay for doctors, medications and hospital visits, and is also quite expensive. Long-term care covers “against elder events,” said Jeff Beligotti, vice president and head of long-term care solutions at New York Life. “As you get older, your conditions, your physical abilities, may deteriorate,” he said. This insurance helps pay for services like a health aide or a skilled nursing facility.
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These are not services you can expect from Medicare. “There’s a lot of confusion about long-term-care insurance in the marketplace,” Beligotti said. “Many people assume Medicare covers long-term care and that’s not the case.” Medicaid does, but individuals have to spend down all of their assets first.
Back to this reader’s letter. If you’re going to go with this insurance, it is better to get it sooner rather than later. Like life insurance, long-term-care insurance is generally less expensive the younger a person is. Some individuals also may not qualify for the coverage dependent on age and conditions. Of course, age isn’t everything. You could have an active 75-year-old in great health who would qualify for care and you could have a 43-year-old who is unhealthy and not eligible for long-term-care insurance. You’re not too late in getting coverage, but if you’re going to get it, don’t delay too much longer.
Being hesitant about getting this type of insurance is understandable, especially considering how expensive it is and the fact that the companies selling them do need to be reliable. Before going with any company, understand how these firms are rated and check the history and background. There are many rating agencies available, such as A.M. Best, Standard & Poor’s and Moody’s. Each agency has a different system. For instance, A.M. Best’s top rating is an A+, whereas at Standard & Poor’s, that would be their fifth-highest rating, according to the Insurance Information Institute.
Also, feel free to shop around for prices and what you’re actually covered for — just like you’d do with buying a home or a car. The more information you have about policies, the better served you’ll be when you settle on one.
Rate increases can be stressful, but there are options out there if you notice it’s getting unruly. One approach is to try to renegotiate your contract and the benefits under your policy. You could also try and work with your insurance carrier, which may have alternative solutions, such as pausing payments and using the accruement of premiums for any future claims.
There are three assessments you should make when deciding if you need long-term-care insurance, according to CD Moriarty, a certified financial planner and columnist for MarketWatch: assess your assets and if they’re able to carry you through old age, assess your care needs or what you anticipate those will be and assess your goals, such as living in your home the rest of your life or not relying on your children for any help.
Speaking of children, if you and your husband expect family members to help you in any caregiving capacity — and even if you don’t expect that — have a discussion with them. Caregiving can be emotionally, financially and mentally challenging for all parties, and it’s best to have everyone on the same page before any care is actually needed. They may be able to assist you in your plans and decisions, too.
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Have a question about your own retirement savings? Email us at HelpMeRetire@marketwatch.com