Rising life expectancy and health care costs have led long-term care insurance, introduced in the late 1970s, to become a much more important element of retirement planning.
The average life expectancy of Americans rose from 59.7 years in 1930 to 78.8 years in 2010, while recent decades brought significant increases in health insurance costs, according to Daily Finance
A study by the U.S. Department of Health and Human Services concluded that more than 70 percent of Americans older than 65 will need long-term care at some point in their lives, according to The Wall Street Journal
. That department also indicated anyone who reaches 65 has a 40 percent chance of moving into a nursing home and a 20 percent chance of staying there at least five years.
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Medicare covers long-term care for up to 100 days but only if the patient has previously been in a hospital for three straight days, The Wall Street Journal reported, adding that the first 20 days are covered in full but the following 80 require a daily co-payment. Meanwhile, the Department of Health and Human Services puts the average cost of a semi-private room in a nursing home at $72,270 a year, and a private room at $79,935 annually. “Buying long-term care insurance alleviates these financial concerns,” The Wall Street Journal said.
Nevertheless, the Insurance Library indicated
in 2013 that only about 7 percent of the U.S. population owned some type of insurance to pay for possible costs of long-term care. That website attributed the low percentage to two reasons: denial and fear.
The Wall Street Journal quoted Mike Hamilton, assistant vice president of Lincoln Financial Group, as saying: “Many people simply think that they will not have a need for long-term care, despite statistics indicating otherwise. It’s always the other person who will need it.”
While people tend to associate long-term care insurance with nursing homes, it also pays for in-home care and assisted living facilities. According to the American Association for Long-Term Care Insurance, 50 percent of long-term care insurance benefits in 2011 went to pay for in-home care, 31 percent for nursing home care, and 19 percent for care in an assisted living facility, the Daily Finance reported.
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That website suggested people look at four factors in deciding whether to buy long-term care insurance: Their family’s emotional and financial health; how far their retirement savings will really take them; rising health care costs; and how much longer people are living these days. It added: “Financial experts suggest purchasing long-term care insurance between age 55 and 64, but remember that the younger you are when you buy it, the lower your premiums will be. If you or your parents are 50 or 55, it's time to discuss your options with an insurance agent.”
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