As the cost of a nursing home stay has increased, so has the cost of long-term care insurance, causing many seniors to reassess the value of such insurance.
Many people’s financial planning for retirement includes a combination of Social Security retirement benefits, other sources of income such as a pension, and savings and investments. On the expenses side, many costs are stable and predictable, with one serious risk being the need for nursing care for a long period of time. Since the annual cost of care in an Alzheimer’s unit can reach $100,000 or more, it is no wonder that many consider long-term care insurance. However, it is important to think about whether such protection is right for you.
First, keep in mind that many nursing home stays are not covered by such policies. Most long-term care policies do not cover the first 90 days, and two-thirds of nursing home stays are for less than 90 days, so insurance will not help at all in these cases. In the case of an extended stay, many policies will cover only a certain dollar amount and only for the period of time covered, often three years.
For many seniors entering a nursing home for an indefinite stay, Medicare will provide for the cost, with assets being used to offset the cost until they are exhausted, when Medicaid will kick in. Therefore, for a single person with no heirs, long-term care insurance may not be necessary. For a married couple, if one spouse requires an extended stay in a nursing home, the healthy spouse may keep the house, one vehicle, and assets of about $116,000 (the amount varies by state), and still qualify for Medicaid for the nursing home expenses.
One view is that long-term care insurance may be unnecessary either if a couple’s assets are less than $116,000 exclusive of the home and one vehicle, such that they will be eligible for Medicaid, or if assets are above about $700,000, in which case the couple can probably self-fund a nursing home stay. Within that window between roughly $116,000 and $700,000, long-term care insurance may be useful.