Britt Cross, Vice President, Director of Insurance and Annuities
While we don’t know what the future may bring, we can plan for the possibilities. For many of us, this includes acknowledging that we may need extra assistance down the line, in the form of long-term care. Long-term care provides the day-to-day help required by those with conditions or illnesses that last a long time. Some people need it for months, while others need it for years or a lifetime.
It is important to understand and manage long-term care expenses, and insurance may be part of the solution. If you lose your ability to perform at least two activities of daily living for at least 90 days, or need substantial supervision due to a severe cognitive impairment, long-term care protection can help cover caregiver and facility costs. Coverage can include assistance with housekeeping, meals, and personal care like bathing or getting dressed, and may also cover skilled medical care.
The cost of care varies by your area of residence and may be more than you expect. The national average annual cost for a private room in a skilled nursing facility is $99,736, while $52,591 is the national average annual cost of a private, one-bedroom unit in a state-certified assisted living facility.1 Considering these expenses, it becomes all the more important to start the planning process early. Below is a checklist to help you start thinking about incorporating long-term care into your financial plan.
Home and Community
While not always possible, many individuals prefer to receive care in their own home during the early stages of an extended care event.
- In-Home Care: Home health care, home care and homemaker services are all examples of “in-home care” that may be available. If you choose to receive care in your home, it may require changes such as the addition of an accessible shower or wheelchair ramp. Home design requirements should be considered prior to making an in-home care commitment.
- Housing Options:
- In-Home Care
- Staying with Family
- Home Sharing
- Active Adult Communities
- Retirement Communities
- Adult Day Care
- Assisted Living
- Nursing Homes
- Community Resources: Senior centers, friendly visitors and meal delivery may offer additional assistance.
- Family and Friends: May be able to assist with regular check-ins, grocery/meal preparation, personal care and transportation.
Paying for Long-Term Care
Consider the below options and work with your financial advisor to create a plan for covering expenses.
- Medicare: Does not cover help with personal care, such as bathing, getting dressed or ongoing care. It offers limited coverage in short-term situations for nursing facilities or home healthcare when medically necessary. Medicare is not a resource for long-term care needs but may help with rehabilitation in a facility after an illness.
- Medicaid: May help pay for healthcare and nursing home services for individuals with limited funds. You must deplete most of your funds to qualify for coverage. Not all nursing homes accept Medicaid.
- Family: Family members or friends may take on the responsibility of long-term care management and/or expenses, but this can create emotional, physical and financial stress.
- Traditional Long-Term Care: Provides monetary benefits for long-term care expenses; but if you never need care, you typically lose the benefits and the premiums you paid. The premiums generally are not guaranteed and may increase in the future.
- Hybrid Life/LTC Options: A life insurance policy with a qualified long-term care insurance rider. The main advantage of these hybrid options is the ability to purchase a plan with premiums guaranteed to remain level.* Because this product is a hybrid with life insurance, individuals also receive insurance benefits for premiums paid if there is no need for long-term care.
Creating a Plan for Care
Whether or not you chose to utilize one of the above solutions, it is important to document your wishes and create a care plan. Your strategy may optimally involve engaging with a team of professionals who are able to provide resources through this major life change.
- Financial Advisor: Your financial advisor will assist in helping you organize your finances and determine the optimal way to cover long-term care expenses.
- Estate Planning Attorney: Will assist in drafting legal documents such as a will, power of attorney or advance directives.
- Caregiver Coordination: Many communities have professionals who may assist in assessing an individual’s care needs. Most traditional long-term care or hybrid life/long-term care solutions offer concierge care coordination services.
- Family and Friends: Get family, friends and social networks involved to find out how they can be of assistance.
- Community Services: Most communities offer information and services for caregivers.
Regardless of how you approach the challenge and costs of long-term care, starting the planning process early, with the support of your advisors, will help to ensure you have the right solutions in place for your situation.
1 2015 Lincoln Financial Group Cost of Care Survey. Jan. 2016.
*Insurance policyholders should always familiarize themselves with policy details, including understanding both the premiums required and benefits available.
D.A. Davidson & Co. is a registered broker-dealer and registered investment adviser that does not provide tax or legal advice. Information contained herein has been obtained by sources we consider reliable, but is not guaranteed and we are not soliciting any action based upon it. Any opinions expressed are based on our interpretation of the data available to us at the time of the original article. These opinions are subject to change at any time without notice. Copyright D.A. Davidson & Co., 2020. All rights reserved. Member SIPC.