Secure Family

Long-Term Care Insurance: Protecting Retirement Savings

A lifetime of retirement savings can be wiped out by an unexpected need for nursing home, assisted living or at-home care. Today, a one-year stay in a nursing home averages $75,000. By 2030, the same stay will cost nearly $148,000. It’s not surprising that many people are unable to save enough on their own to cover the cost of long-term care.

It’s important to know that health insurance plans generally do not pay for long-term care services. Many Americans also mistakenly believe Medicare will cover costs. However, Medicare provides skilled nursing home care only for a short time following hospitalization and limits help at home to those who need skilled nursing care and rehabilitative therapy. Medicaid is the federal-state health insurance program for the poor. Middle-income individuals may qualify for long-term care under Medicaid, but only after spending down their savings.

Long-term care insurance can cover costs and protect lifetime savings, providing families with peace of mind. Services covered may be provided at home, in a nursing home or in a community-based care facility—such as an adult day care—or in an assisted-living setting. Today’s policies also provide support for family caregivers.

Long-term care insurance also can be combined with life insurance. In addition, a 2006 federal law will allow long-term care insurance to be combined with an annuity—providing consumers with increased flexibility as their needs change in retirement. Beginning in 2010, an individual could accumulate assets in an annuity during working years; at retirement, that annuity could be used to provide lifetime income. If needs dictate, the long-term care insurance benefit within the annuity could be used to pay for services.

Long-term care insurance can protect individuals and families from financial crisis, and at the same time, alleviate the strain on public programs. If three-quarters of individuals between the ages of 40 and 65 who can afford long-term care insurance were to purchase and maintain policies throughout their senior years, by 2030:

• The annual savings in Medicaid nursing home expenses would total $12.2 billion.
• The annual savings in out-of-pocket expenses would total $24.4 billion.

In 2007, life insurers paid $1.7 billion in long-term care insurance benefits.

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