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Individuals often overlook the importance of having a plan in place that will prepare them for a potential loss of independency. While it is true that the elderly are most prone to a decline in the ability to perform the daily functions of life, the chances of any individual (regardless of age) requiring long-term care in their lifetime are higher than you might think. According to Genworth, “40% of all adults in the United States require long-term care before they reach the age of 65”. Also consider that the U.S. Department of Health & Human Services (HHS) puts the likelihood that the average American turning 65 will need some form of long-term care at 70%. With all of this in mind, it is becoming ever-so-clear that a discussion over whether or not to purchase an insurance policy to cover this type of care is a must.

Long-term care (LTC) can be defined as a wide array of supportive services for individuals who are unable to take care of themselves over a prolonged period of time. This can include assistance with personal tasks such as bathing and eating, as well as everyday tasks like housework and pet care. Unfortunately, this type of care can be quite expensive. According to Genworth’s 2016 Cost of Care Study, the median monthly cost of a private room in 2016 was $7,698 (1.2% higher than 2015), while a semi-private room was $6,844 per month (a 2.3% increase from 2015). Although, it is important to consider that in-home care can often cost more than care facilities since providers typically charge by the hour. Genworth states that “nearly one-third of Americans (30%) incorrectly believe that costs for these (in-home care) services run under $417 per month, when in actuality, the national median rate is $3,861 per month for an in-home aide or $3,813 per month for homemaker care.” Furthermore, contrary to common belief, Medicare and other forms of health insurance do not cover the costs, as long-term care is not considered a medical expense. With these costs in mind, many individuals look to make a decision on whether or not to purchase a long-term care insurance (LTCI) policy.

LTCI policies are designed to cover the costs of such care by reimbursing policyholders a daily amount (up to a pre-selected limit) for the services provided. However, much like the cost of the care itself, this type of insurance can be pricey. A typical policy taken out by a New Jersey couple in their mid-50s can initially cost approximately $3,100 annually, and premiums can increase without warning. So, is a long-term care policy the answer for you? It is generally recommended that if individuals/couples have less than $750,000, then the best approach would be for them to spend down their assets so that Medicaid can pay for all costs of LTC, rather than taking on the cost of the insurance. For individuals/couples with $2,500,000 or more, self-insuring is recommended given that the value of the assets will be able to effectively pay for the costs.

If you fall in the middle of this range ($750,000-$2,500,000), LTCI is likely your best way to preserve your assets for your heir and spare them a large portion of the physical and financial burden of your care. Most experts advise purchasing a policy when you are younger (early to mid-50s) and in good health so that premiums are as low as possible.

Overall, while the preservation of wealth is always a priority, it is equally important to ensure that the future of your health and wellbeing are sound.


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