The Long and Short of It

A Look at Long-Term 
Care Insurance

With health care costs on the rise, it’s crucial to have a plan regarding your future care needs. For most of us, investing in long-term care insurance goes a long (and helpful) way toward easing the burden of trying to plan for the unknown while, at the same, allowing us to stay in control of our future and protect our hard-earned assets.

Unlike traditional health insurance, which tends to cover acute or short-term expenses, long-term care insurance is designed to cover chronic care over the course of months or years. Long-term care policies reimburse us for the costs we pay for services to assist with daily living, whether those expenses are incurred at home, in a community care facility, or at a nursing home.

According to the U.S. Department of Health and Human Services (HHS), 70 percent of people turning 65 can expect that they will need some form of long-term care during their lives. The likelihood of long-term care increases with age and the deterioration of our health. Women, because they live longer, and those who live alone are also more likely to need such care.

But long-term care services are expensive. Depending on where we live, we can spend between $36,000 and $72,000 a year on an assisted living facility, according to HHS. The price tag increases exponentially for care at a nursing home. The national average cost of elder care services in a nursing home facility is $83,950, according to a Genworth survey conducted in 2013.

While some people qualify for assistance through Medicaid or Medicare, there are very specific criteria, including financial requirements, we must meet to qualify.

For those with assets exceeding Medicaid’s qualifying amount, investing in long-term care insurance could be a prudent use of those funds.

Typically, long-term care insurance is most beneficial for those with more than $500,000 in assets beyond the value of their home but less than a few million dollars. But individuals with a net worth in excess of this guideline still purchase long-term care insurance for the peace of mind it affords and the control it gives them over where they receive care.

In addition to traditional long-term care insurance, there have been a few product innovations over the last several years. One in particular that is gaining significantly in popularity are life insurance policies with a tax-qualified long-term care riders attached. The biggest appeal of such an approach compared with traditional long-term care insurance is that if longer-term care isn’t needed, the beneficiary receives a tax-free death benefit. Unlike a traditional long-term care policy, which essentially requires that we “use it or lose it,” these plans offer the holder and his or her family a guaranteed benefit, whether it’s in the form of a death benefit, a long-term care benefit, or a combination of both.

The need to pay for long-term care can often arise suddenly and costs can add up quickly. Do your research, ask questions, and make an informed decision; it could be one of the most important decisions you make with regard to your retirement.

This article is provided by RBC Wealth Management on behalf of Gary Kiemele, a Financial Advisor at RBC Wealth Management, and may not be exclusive to this publication. The information included in this article is not intended to be used as the primary basis for making investment decisions. RBC Wealth Management does not endorse this organization or publication. Consult your investment professional for additional information and guidance.

RBC Wealth Management, a division of RBC Capital Markets, LLC, Member NYSE/FINRA/SIPC.