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June 3, 2019
How to Decide If You Need Long Term Care Insurance

How to Decide If You Need Long Term Care Insurance

Do you need Long Term Care (LTC) insurance? Is LTC insurance worth the cost?

In order to decide if you really want and need LTC insurance, you should look at the following factors:

  1. What are the odds of my needing long term care?
  3. If I did need long term care, could I afford it?
  5. If I couldn’t afford long term care, would it make sense to rely on public aid?
  7. Am I a small business owner?
  9. Have I considered the alternatives to long term care insurance?

These are all very important questions, and the answers will be slightly different for everyone. However, there’s one problem: you might not know the answers!

  • For example, do you know the odds of needing long term care? Did you know that factors like gender and marital status play an important role?
  • Do you know how much long term care actually costs? Do you know how much it will cost in 20 years?
  • Are you aware of how public aid for long term care works? Are you comfortable with the quality of care you’d receive in that scenario?
  • Do you know the perks of having an LTC insurance policy if you’re a small business owner? Would you get LTC insurance if you did?
  • Did you know there are alternatives to LTC insurance?

There are a lot of questions, and we’re going to help you answer them for yourself.

What are the odds of my needing long term care?

Overall, there is a 68% chance that a senior over the age of 65 will need some kind of long-term care due to a physical disability, a    vision or hearing impairment, or a cognitive condition (AARP: A Report to the Nation on Independent Living and Disability).

However, there are a few factors that could make you more likely to be part of that 68%.

Risk factors include:

  1. Family members who needed long term care
  3. Parents with cognitive impairments like dementia or Alzheimer’s
  5. Any conditions you have that could lead to future impairment
  7. Being overweight or obese
  9. Being a single woman

If any of those apply to you, you’re more likely to need long term care in the future.

Another factor to look at is how long you would theoretically need care – the longer you need care, the more expensive it gets, and the more you’ll need    to look at some kind of insurance policy.

The following statistics come from the American Association for Long-Term Care Insurance.    

Female 2.6 years
Male 2.3 years
Married 1.6 years
Single/Never Married 3.8 years
Widowed 2.3 years
Divorced/Separated 2.7 years

Single and never married individuals tend to spend significantly more time in a nursing home than those who are married. Keep in mind that your    marital status can change in an instant, as is the way of life.

If I did need long term care, could I afford it?

Today, the average cost of a single day in a nursing home is $225 – and that’s if you want to share a room with someone else. If you want a private room,    the average cost goes up to $253 per day (

That’s $7,698 per month, $92,376 per year, and $277,128 for 3 years of care. Three years is the average amount of time a person will spend    in a nursing home (American Association for Long-Term Care Insurance).    

Long-term care costs have also doubled over the last 20 years. If we’re assuming the same projection for the next 20 years, you’re looking at $184,752     for a year in the nursing home.

Would you be able to pay that? If you answered “no,” you may consider looking at insurance option. If you answered “yes,” you may ask yourself this question:    would I rather self-insure, or would I rather get an insurance policy?

If I couldn’t afford long term care, would it make sense to rely on public aid?

If you decide to rely on public aid, you should know about some of the issues that will arise.

The first is that you don’t get to choose your quality of care when the government steps in to pay.

Trust us when we say you won’t exactly be staying at a top-notch facility. You have no choice as to where you’ll receive care, and if you’re accustomed    to a certain style of living, this can be a terrible way to spend the latter part of your life.

Secondly, the purpose of long-term care insurance is to protect the money you’ve worked so hard for so that you can pass it on to your loved ones. You     would have to sell everything you own in order to qualify for Medicaid,    so just consider whether you want to give up what you do have.

If we had to put a number on it, we’d advise that if all of your assets were less than $100,000, you should probably rely on Medicaid. Remember that this    includes all of your savings, your home, your car, and any other assets you might own.

There are a lot of reasons behind this. Let’s say that my grandfather went into the nursing home, and my grandmother stayed at home. The spousal impoverishment    act of 1988 would allow my grandmother to keep a certain amount of money every month to maintain her standard of living.

The person in the nursing home can go on Medicaid and the state will start paying for them, but the spouse doesn’t have to sell the home and all of the    assets – they get to keep a certain portion of that because of spousal impoverishment.

As of 2019, the maximum resource standard is     $126,420, which is why I’d probably rely on Medicaid to pay for long-term care if your assets were around that $100,000 mark. As    long as you have a spouse, you might be able to keep those assets.

If you’re single, you have to sell everything, and then you run into situations where you no longer have a home you can pass on to your kids, or you don’t    have a vehicle you can give to your grandson.

It’s those kinds of things that make you realize how important your assets are.

Am I a small business owner?

If you’re a small business owner, there are major tax benefits to choosing a long-term care insurance policy.

If you have a C-corp, you can write off the premiums. The business pays for the insurance, and you get the tax advantages.

You can also choose to do a 10-pay, which means you’re opting to pay for the entire policy over the course of 10 years. This means that    you pay for the long-term care premiums, which are higher than normal, but after 10 years, your policy is paid off and you don’t have to worry about    future rate increases.

This is also a great idea if you’re a small business owner, because you can pay those premiums in 10 years while you still have your business.

Have I considered the alternatives to long term care insurance?

There are alternatives to regular long term care insurance.

One is called life insurance with a long-term care rider.

The major benefit of this option is that you pay into a life insurance policy knowing you’ll actually get that money back. Either it will be passed on    to your beneficiaries when you pass, or you’ll access that money before you die to pay for long-term care.

It doesn’t have inflation protection, which can be a big bummer, but the fact that you get to kill two birds with one stone can sometimes offset that.

Another benefit is that life insurance does not have rate increases – your premium is reliable, meaning you can plan your retirement without the “unknown”    of the long-term care insurance rates.

Another alternative is short term care insurance, which has the same benefits of long term care insurance, but it only covers you for    up to 1 year.

So, after all that – do you need long term care insurance?

We’ve received letters from a myriad of individuals who said their policy saved their parents from losing their home, that their policy paid out over $100,000    for them, or that they didn’t know what they’d do without it.

Our stance is that it’s always best to prepare for the worst – that’s why we’re in insurance. It can be worthwhile to at least look at    the options before you pass over long term care insurance altogether.

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