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Seventy percent of Americans over the age of 65 will likely require long-term care from a home health group, assisted living facility, or nursing home. How can you afford those health care costs, which general health insurance often does not cover? By obtaining long-term care insurance.
“When you envision your retirement, you never stop to think, ‘What if I’m unable to do the things that I can do today?’ And really, long-term care is all about having help to do basic things,” says Donna Peterson, senior vice president of Retirement Solution Strategies with Wells Fargo. Use this information to better understand the pros and cons of long-term care insurance.
Long-term care insurance offers some protection from the high cost of help you may need in the future — for example, an extended stay in an assisted living facility or a nursing home. Today, the cost of care can range from $40,000 a year at an assisted living facility to more than $85,000 a year for a private room in a nursing home.
The younger you are when you purchase long-term care insurance, the lower your premiums will be (though you will pay them for longer). The average long-term care policy costs roughly $900 a year in premiums when purchased at age 50. It goes up to $1,850 annually when purchased at age 65 and almost $6,000 annually when purchased at age 75. If you wait to buy long-term care insurance until you are experiencing health problems, you may find you aren’t eligible for coverage.
Long-term care policies vary significantly in their benefits. Some cover in-home care, such as housekeeping, maintenance, and transportation assistance. Others provide full-fledged nursing home care. The costs of the policies reflect those benefits, but your present health and your family’s medical history can also affect what you pay.
Benefits are usually paid in the form of a daily allowance, but some policies have a monthly payment schedule. To ensure your policy’s benefits keep up with rising costs, you can opt for an inflation rider. An insurance professional or financial advisor can help you compare policies.
Most long-term care insurance policies cap their benefits at a total dollar amount. Those that offer lifetime benefits eliminate the fear of running out of coverage, but they are very expensive. Because the average nursing home stay is about two and a half years, you may want to consider policies that come with four- or five-year limits, which are less expensive and more common.
That said, choosing a policy is all about balancing those costs and needs. “You might not get everything in a policy that you want because you just can’t afford to have something that would cover you for the rest of your life,” Peterson says. “Think about what is going to be sufficient coverage for you, that would protect you to the extent possible within the boundaries of what’s affordable.”
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Source: American Institute of Certified Public Accountants (AICPA), “CPAs Stress the Importance of Long-Term Care.” Posted August 2012.
Insurance products are offered through nonbank insurance agency affiliates of Wells Fargo & Company and are underwritten by unaffiliated insurance companies.
These articles have been prepared for informational purposes only and are not a solicitation or an offer to buy any security or instrument or to participate in any trading strategy. The accuracy and completeness of this information is not guaranteed and is subject to change. Since each investor’s situation is unique you need to review your specific investment objectives, risk tolerance and liquidity needs with your financial professional(s) before a suitable investment strategy can be selected. Also, since Wells Fargo Advisors does not provide tax or legal advice, investors need to consult with their own tax and legal advisors before taking any action that may have tax or legal consequences.
Retirement Professionals are registered representatives of Wells Fargo Advisors, LLC. Wells Fargo Advisors is the trade name used by two separate registered broker-dealers: Wells Fargo Advisors, LLC and Wells Fargo Advisors Financial Network, LLC, Members SIPC, non-bank affiliates of Wells Fargo & Company. Discussions with Retirement Professionals may lead to a referral to Wells Fargo Advisors’ affiliates including Wells Fargo Bank, N.A. Wells Fargo Advisors and its associates may receive a financial or other benefit for this referral. Wells Fargo Bank, N.A. is a banking affiliate of Wells Fargo & Company.