Long Term Care Insurance

Long-term Care Insurance

Updated on Mar 02 2018


The 21st century demands for retirement preparation, as Americans can no longer rely on pensions and built-in retirement plans at their business. In fact, less than 40 percent of the people going into retirement have calculated how much they expect their expenses and income will be in retirement, according to a recent Money article. Healthcare is a tremendous retirement expense, and people believe that Medicare pays for more than it actually does; which is why long-term care insurance is something you should consider.

Get Prepared: Health Care is a Top Expense in Retirement

Employer-based health coverage will not pay for daily, extended care services. Medicare will only cover a short stay in a nursing home, or a limited amount of at-home care—but only under very strict conditions. To help you cover potential long-term care expenses, consider buying long-term care insurance to help ensure you don’t drain your retirement savings on unexpected medical problems.

Policies offer many different coverage options, so you can choose the one you think will best fit your needs. Since you can’t predict what your future long-term care needs will be, you may want to buy a policy with flexible options. Depending on the policy options you select, long-term care insurance can help you pay for the care you need, whether you are living at home or in an assisted living facility or nursing home.

Keep in mind that even though you may feel great today, health can decline at any time. Consider your genetics and your current health and lifestyle to help you determine what long-term care insurance coverage may make the most sense for your situation. By planning ahead, you can future-proof your retirement.

6 Long-term Care Insurance Factors to Ponder

Planning and investing for retirement and your unique investment time horizon can be tricky, which is another reason you might want to consider long-term care insurance. Here are a few factors to think about when deciding whether to invest in long-term care insurance:

  1. Your age and health – Policies cost less if you purchase when you’re younger and in good health. If you’re older or have a serious health condition, you may not be able to get coverage (and if you do, you may have to spend considerably more!).

  2. The premiums – Think about whether you’ll be able to pay the premiums, both today and in the future, without breaking your budget. Premiums often increase over time, and your income may go down. If you find yourself unable to afford the premiums, you could lose all the money you’ve invested in a policy.

  3. Your income – If you have difficulty paying your bills now or are concerned about paying them in the years ahead, when you may have fewer assets, spending thousands of dollars a year for a long-term care policy might not make sense. If your income is low and you have few assets when you need care, you might qualify for Medicaid. If you are unsure whether you should invest in a policy, consider seeking an expert’s opinion.

  4. Your support system – You may have family and friends who can provide some of your long-term care should you need it. Think about whether or not you would want their help and how much you can reasonably expect from them.

  5. Your savings and investments – Consider getting a financial advisor or a lawyer’s advice about ways to save for future long-term care expenses and whether purchasing long-term care insurance is right for you.

  6. Your taxes – The benefits paid out through a long-term care policy are generally not taxed as income. Most policies sold today are also “tax-qualified” by federal standards, which means you can deduct the value of the premiums from your federal income taxes if your costs are more than a percentage of your income. Only certain households qualify, so it’s important to do your research. Here are other things to keep in mind:

  • The amount of the federal deduction depends on your age
  • Many states also offer limited tax deductions or credits

Is Long-term Care Insurance Right for You?

Only you can answer whether long-term care insurance is right for you. If the benefits outweigh the negatives, long-term care insurance will not only help you be prepared in the case of an emergency; the coverage will also give you peace of mind.

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