Why You May Want to Think Twice Before Purchasing Long-Term Care Insurance

By Britt Erica Tunick

People are living longer lives than ever before, with the average American expected to live well into their late 70s and, in many cases, significantly longer. At the same time, however, older Americans are struggling with a rising number of chronic and long-term illnesses. Given this reality, retirement planning should consider the high probability that the average retired person will at some point be faced with substantial healthcare costs. One popular way of funding such later life healthcare costs is long-term care insurance, but it may not necessarily be the best way.

Like it or not, longer life spans do not come without a tradeoff. According to the Centers for Disease Control and Prevention, 80% of elderly people suffer from at least one chronic illness, with one of every three elderly people unable to complete everyday activities such as making meals. In a recent study published in Age and Ageing, a British scientific publication, the number of elderly people in the world who suffer from four or more chronic illnesses is expected to double by 2035 as illnesses such as dementia and heart disease continue to soar. As a result, even if they do not wind up in nursing homes, most retirees will find themselves in need of some sort of long-term healthcare –care that is extremely costly. According to the findings of Genworth Financial’s latest Cost of Care Survey, the cost of the average nursing home in the U.S. in 2019 is $8,121 per month.

Long-term care insurance has been around since the 1990s and has become a popular way of preparing for the high costs of healthcare that many people face in their retirement years. Since its introduction, however, the cost of such insurance has risen significantly –with the cost for such coverage rising the older a couple or an individual is when they first take out coverage. Nonetheless, though it is less expensive to get such coverage the younger and healthier you are, the extra years of premium payments may ultimately negate the benefits. According to the American Association for Long-Term Care Insurance, as of the beginning of 2019, a married couple who are both 55 years old can expect to pay $3,050 per year for long-term care insurance. When it comes to lifetime coverage, the costs climb even higher and involve many exclusions. Meanwhile, according to Boston College’s Center for Retirement Research, men who need nursing homes typically spend less than 11 months in such facilities, while women typically spend around 17 months.

In light of such realities and the cumulative cost of carrying long-term coverage for any significant amount of time, if long- term coverage is something you are considering, make sure to look into all of the options available to you —from limited coverage policies to the most comprehensive coverage —and take the time to do the math. The majority of long-term care policies offer some combination of general health care, nursing home care, and assisted living. The amount that such policies will ultimately cover can vary significantly, however, so it is important to compare coverage between different insurers and policies. If you are at all uncertain as to whether or not you need such coverage, take the time to meet with a qualified financial advisor or expert on the topic before committing.