Costs of long term care have soared over the last few years, and are expected to soar even higher in the future. If you’re trying to paint of clearer picture of how the LTC situation is looking in this country, this page will serve you right.
Cost of Care Survey
According to the 2014 Cost of Care Survey by Genworth, this is what you should expect to pay for a private nursing home room (assuming a 4% annual increase rate).
|1 Year of Care||3 Years of Care||5 Years of Care|
|The cost today||$87,600||$272,452||$474,470|
|Cost in 15 years||$157,763||$492,472||$854,493|
|Cost in 30 years||$284,122||$886,914||$1,538,894|
Based on the same survey, the computed annual average cost of in-home care was $45,760. Important to note is that the survey didn’t take into consideration extra amenities and lifestyle choices.
Apparently, quality long term care in a reputable facility could cost up to 6 figures annually.
What’s the probability that you’ll need long term care after the age of 65?
According to the American Association for Long Term Care Insurance, 70% of Americans over the age of 65 will need some form of long term care.
- There’s a 17% chance that you’ll need LTC for 1 year or less
- There’s a 12% chance that you’ll need care for 1-2 years
- There’s a 20% chance that you’ll need care for 2-5 years
- There’s a 20% chance that you’ll need care for more than 5 years.
- There’s a 31% chance that you won’t need any LTC after the age of 65
We are living longer
It’s not just a piece of statistics, it’s a reality. The longer we live, the more important it is to ask these questions:
- Who will care for me and when the need arises?
- How will I pay for the care I need?
- What impact will the need for care have on my family?
When given the choice, more people choose to stay in their own homes:
- 51% of people who need LTC get home health care, where a professional caregiver provides services at home.
- 31% get care from a nursing home, where 24-hour professional assistance is provided.
- 18% get community care in an Adult day care or assisted living center.
When is the best time to buy Long Term Care Insurance?
Looking at it from a financial standpoint, the best time to buy LTC protection is when you’re aged between 45 and 75 years, and have assets worth at least $200,000 that you need to protect. Individuals under the age of 45 might also be interested in buying an LTC plan either for themselves or their parents. Premiums are much lower at a younger age. Keep in mind that long term care insurance is medically underwritten, which means, which means that all applicants should be in good health.
Long Term Care Insurance Applications Stats
Here’s how folks are applying for LTC coverage, factoring in their age at the time of application.
- Under the age of 55 – 28.7%
- Between ages 55 and 64 – 54%
- 65 years or more – 17.3%
Long Term Care Insurance Rejection Stats
Below are statistics on rejections of LTC policy applications for people of varying age.
- Ages 50-59 – 17%
- Ages 60-69 – 25%
- Ages 70-79 – 44%
- Age 80+ – 70%
Most rejections are due to unacceptable health.
Planning Solutions for Long Term Care
When it comes to planning for long term care, you have the following options:
- Self insurance – this entails paying for your long term care by allocating your personal savings, or setting aside some asset some investment as part of your retirement strategy. The catch is that care can be devastatingly expensive and can eat into massive chunks of your money. Overall, this could have a negative impact on your wealth portfolio.
- Standalone long term care plan – with a traditional LTC cover, you create a pool of money that can be used to reimburse you when you incur long term care expenses. Standalone policies offer more flexibility in that you can specify that types of benefits you want, as well as the types of services you need to be covered. Basically, you can customize the policy to your liking.
- Combination life and LTC plan – from the statistics above, there’s a 31% chance that you’ll never need Long Term Care above the age of 65. If you don’t believe the 70% probability of needing care is compelling enough for you to buy an LTC policy, a combination policy might be just what you need. Also referred to as hybrid policies, combination policies blend life and long term care insurance within a single policy. This way, you create a pool of money that insures you against each risk. The policy has a cash value from which Long Term Care expenses can be deducted. It also has death benefits for your beneficiaries.