Key LTC Statistics

• 44%: The percentage of men who will need LTC.
• 58%: The percentage of women who will need LTC.
• 0.88 years: The average stay in a nursing home for men.
• 1.44 years: The average stay in a nursing home for women.
• 22%: The probability that a man will need more than one year
in a nursing home.
• 36%: The probability that a woman will need more than one
year in a nursing home.
• The median annual cost for an assisted-living facility is
$45,000.
• The median annual cost for a private room in a nursing home
is $97,455.
• 4%: The five-year annual inflation rate in nursing-home costs
for a private room.

Categories of Care

• Home Care: Home health aides offer services to people who
need more extensive care. It’s “hands-on” personal care, but
not medical care.
• Assisted Living: Residential arrangements providing personal
care and health services. The level of care may not be as
extensive as that of a nursing home. Assisted living is often an
alternative to a nursing home, or intermediate level of LTC.
• Nursing Home: These facilities often provide a higher level
of supervision and care than assisted living facilities. They
offer residents personal care assistance, room and board,
supervision, medication, therapies and rehabilitation, and
on-site nursing care 24 hours a day.

LTC Funding Options

As the preceding statistics indicate, LTC is a service that many
people may need at some point in their lifetimes. It is important to
consider how one is prepared to pay for this service, especially
with the rising costs of care. Also, the cost of care can vary
significantly by location. LTC insurance is one tool in the financial
planning process that may allow individuals to protect their
assets and relieve the burden of paying for care from their family.
In contrast, many individuals feel that, if their net worth would
allow them to pay for their coverage out-of-pocket, they need
not consider a LTC insurance policy. However, even if that is the
case, there are significant reasons to consider such a policy,
such as peace of mind and potentially preserving the assets you
would have used to pay for your care.

LTC Insurance

LTC insurance is private insurance specifically designed to cover
some or all of the custodial care expenses typically incurred
while at home, in assisted living facilities, or in nursing homes.
LTC insurance comes in several policy types. Indemnity and
Expense Incurred are the two most common.
• $3,560: Average annual premium for LTC policy purchased
by a couple age 60, at coverage start date. (Policy provides
a daily benefit of $150, three years of coverage in home and
institutional settings with a 90-day waiting period, 100% home
care benefit, and 3% automatic compound inflation protection.)
• 17%: The percentage of applicants ages 50-59 who were
denied long-term care coverage due to health issues.
• 45%: The percentage of applicants ages 70-79 who were
denied long-term care coverage due to health issues.

Pros:
• With proper coverage, the financial risk of LTC is reduced and
preserves investments for heirs.
• Premiums might be tax deductible.

Cons:
• Potential premium increases (after already paying premiums).
Higher premiums if you wait.
• Difficult to predict the amount of coverage needed and there
may be out-of-pockets expenses anyway.
• Policy might lapse if premium payments are missed.
• If unused, premiums might be viewed as a waste of money.

Hybrid Insurance Products

Hybrid insurance products that combine LTC insurance with other
forms of insurance are becoming increasingly more common.
There are many ways to obtain LTC insurance through a hybrid
product. One of the most common vehicles is a life insurance/
LTC policy. Typically a rider is added to a life insurance policy
which allows the client to access the death benefit to pay for LTC
needs if necessary.

Pros:
• Larger initial premium can eliminate the potential for future
premium increases and policy lapses that are possible with
traditional LTC insurance.
• Death benefit is available if LTC insurance isn’t used (receive
something in return).
• Generally fewer underwriting requirements. Some might qualify
for a hybrid policy when they otherwise wouldn’t under a
traditional LTC insurance policy.

Cons:
• Large initial premium removes assets from your investment
portfolio.
• Limited access to cash value if you want the policy to maintain
the same level of LTC coverage.

Self Funding

Some people are able to save an adequate amount over their
working years to fund retirement needs and potential future LTC
expenses. Therefore, rather than purchasing LTC insurance or
a hybrid policy, these people choose to use their investment
portfolio/savings to fund LTC.

Pros:
• No cost if LTC isn’t needed.
• Money saved on the insurance can be invested or used to fulfil
other planning goals.

Cons:
• Any LTC expenses must be met by withdrawing assets from
investment accounts (investment and tax implications).
• Costs and length of care is difficult to predict or budget.
• Additional stress on family in order to manage and organize
financial needs.
• LTC expenses can reduce assets that would otherwise go to
family as inheritance.

Medicaid

If insurance is considered to be too expensive and self-funding
likely isn’t a possibility, Medicaid can cover LTC needs if necessary.

Pros:
• Provides an option for people with very little savings.
• Can be a backup plan if personal assets are exhausted.

Cons:
• Requires relative poverty in order to qualify.
• Medicaid recipients may receive a lower quality of care, due to
lower reimbursements to facilities.
• Medicaid planning can be complex (look back periods, reduced
access to assets) in order to qualify.