How to Prepare for the Cost of Long-Term Medical Care

The decision to buy long-term care insurance vs. self-insuring is a common conundrum. If you can afford to self-insure based on your estate planning, then the choice boils down to whether you would like to retain the risk or share the risk with an insurance company.

What is long-term care insurance?

Long-term care insurance covers costs related to nursing home care, assisted living facilities or caretakers coming to your house. It also covers things like home modifications, in-home caretakers, and medical equipment. All of this means you’ll potentially be able to live longer in the comfort of your own home.

Traditional long-term care insurance policies are triggered when you can no longer perform two out of six activities of daily living (think bathing, dressing or eating).

Current trends in long-term care

– If you are married and over the age of 65, there is a 91% likelihood that one of you will need long-term care

– The average annual cost for a nursing home is more than $100,000. Dementia patients cost twice as much

– The estimated cost for care in the final five years of life is $367,000 for people with dementia and $234,000 for those without

– Now the good news: Long-term care insurance premiums are tax deductible up to a certain amount. And you may even be able to pay your premiums out of a pre-tax Health Savings Account (HSA)

The decision to buy long-term care insurance is very individualized. If you happen to use it early, it can be a good investment, because you have paid less premiums upfront and are using the benefits. The longer you take to use a policy, the lower the return on the policy.

Regardless, the main issue here is how to provide quality, compassionate care for ourselves and our loved ones at the end of their lives. Learn more about long-term care here.