When you’re planning for retirement, there is a good chance that you haven’t thought much about long-term care insurance. While we might think about life insurance and what happens when we die, few of us actually stop to think about whether or not we will need to be cared for somewhere other than in our homes.
However, the Department of Health and Human Services points out that someone aged 65 today has an almost 70% chance of needing some type of long-term care service at some point. Women are even more likely to need long-term care, with women age 65 today likely to spend about 3.7 years in long-term care, as compared with men, who spend, on average, 2.2 years in long-term care.
There is a chance that you won’t need long-term care at all, but It is far more likely that you will be one of those who spends at least sometime in the long-term care facility. As a result, it is important to be prepared. Long-term care insurance candy one tool that might be able to help you prepare for the future.
Here are several things to consider before you decide whether or not to get an long-term care policy:
Consider Your Financial Situation
The first step is to evaluate your finances. Will you have enough saved up to pay the costs of long-term care? Depending on the facility, amenities, and level of care you require, you might need to pay between $2,500 and $5,000 a month — or more. Is your nest egg big enough to handle that, along with other costs you might have?
It might be more manageable for your finances now and during retirement to pay a monthly premium for a policy that will cover your bases later on. You don’t have to get the most expensive “Cadillac” plan, either. Choose an affordable plan that’s sustainable over time, while still allowing you the basics.
Earlier is Less Expensive
If you wait until you are 65 to apply for a long-term care policy, you might not be able to afford it. Instead, apply earlier. Consult with a financial professional to determine if it makes sense to purchase a policy while you are in your mid-40s to early-50s. Your premiums will be more affordable if you start paying them earlier.
Make Sure You Keep Paying the Premiums
Once you stop paying the premiums and the policy lapses, you lose the money you’ve paid in — and the coverage you need. The last thing you want is to give up on the policy six months before you need it. Budget for the premiums if you decide that you want to go with long-term care coverage.
Consider Various Policy Options
Think about how long you might need care, and consider different products that might work. There are couples options that allow you each purchase two years in a facility, giving the couple a combined four years of coverage. One person could use three years if he or she outlived a partner who only use one year. Other products are tied to life insurance. There is a death benefit for your survivors if you don’t use the long-term care component.
When considering these options, read the fine print and make sure you understand how the policy works so that you can be sure it’s appropriate for you.
Evaluate Your Plans Regularly
You might change your plans later, or circumstances might change. You might need to adjust your coverage, or coordinate your finances differently, depending on the situation. Take the time to review your long-term care coverage along with the rest of your financial plans at least once a year.
Let Others Know of Your Plans
It’s important to keep others in the loop. Let your loved ones know your wishes, and give them information that can allow them to advocate on your behalf. At the very least, you need to let someone know that you are paying premiums for a policy, and provide the insurer with the contact information of someone they should notify if you stop paying premiums. That way, if you forget, someone can step in and make sure the policy doesn’t lapse.
Investigate the Company
Finally, be careful of where you buy your policy. You want to stick with a company that is sound, and that won’t fold just before you need the help of the policy. Review ratings for the company, and do your due diligence.
Not everyone needs long-term care insurance. However, if it makes sense in your situation, consult with a knowledgeable financial planner about your options, and how to integrate it into your finances.