While not a glamorous part of retirement planning, understanding your options for covering long-term care needs is important. You can’t expect Medicare to fully flip the bill and people often have varying preconceived notions as to what constitutes long-term care and how the expense is covered.

Long-term care insurance isn’t the only way to pay for care — many depend on their savings, others qualify for government assistance (Medicaid), and some have access to long-term care coverage through a life insurance policy or an annuity.

While this article is a long-term care insurance highlight, choosing the direction best for you requires careful consideration of your desires, and savings, along with a realistic outlook on your health. We’ve gathered a few common questions to help you gain further knowledge on the topic of long-term care insurance so you can decide if it’s right for you.

What Does Long-Term Care Insurance Cover?

The goal of long-term care insurance is to cover expenses not covered by traditional health insurance or Medicare. Remember, Medicare only covers short stays in a hospital or a rehabilitation facility, leaving the rest of the bill to you.

Long-term care insurance is often based around Activities of Daily Living (ADLs) which includes: bathing, dressing, personal hygiene, getting in and out of a bed or chair, walking, using a toilet, and eating. A standard long-term care insurance policy requires you to pay a monthly premium and will pay out when services are rendered to assist with ADLs or skilled care beyond Medicare’s coverage. This can include in-home care, assisted living facilities, and nursing home care.

You will be required to show proof of debilitation and there will likely be an elimination period ranging from 30 to 90 days, where you pay for the service out of pocket before coverage kicks in. Remember, policies with wide coverage and short elimination periods will likely come with the highest premiums.

According to Delaware.gov, state law requires that certain provisions be included in all long-term care insurance policies. Some of these provisions are:

Coverage for all levels of nursing home care: skilled, intermediate, and custodial;
Coverage for 12 months or longer;
Policies must be guaranteed renewable. This means the company cannot cancel your policy for any reason except non-payment of premiums or a misrepresentation on your application for coverage;
No longer than 6-month pre-existing condition exclusion;
30-day free look period. You can return the policy for any reason during this time and receive a full refund.;
Benefits cannot be conditioned on a hospital stay prior to admission to a nursing home;
Benefits cannot differ based on the type of illness or disability being treated. However, policies do not pay for drug or alcohol treatments, or mental or nervous disorders. Coverage for those diagnosed as having Alzheimer’s disease and other organic brain disorders is required.

What are the Pros and Cons of Long-Term Care Insurance?

There are always two sides to every story, and optional insurance is certainly no different. Just because there are benefits, doesn’t mean it’s for everyone. Here are a few key factors to consider from both sides of the spectrum.

Pros of Long-Term Care Insurance:

Shelter your savings and gain peace of mind that long-term care expenses won’t fall on loved ones.
Choose the care that aligns with your wishes — relying on Medicaid will leave you with little choice when it comes to selecting care providers or facilities and many won’t qualify for assistance.
Statistics show you’re more likely than not to put your policy to use; those 65 and older have a 70% chance of needing some type of long-term care services within their remaining lifetime.

Cons of Long-Term Care Insurance:

Like any insurance, you could pay premiums for decades and never use the policy
Selecting a policy or coverage value is challenging
Elimination periods and uncovered expenses can still cause a financial burden.
High premiums that rise approximately 25-50% every 10 years
Strict underwriting policies make qualifying for long-term care difficult (you may need to start the application process in your early 50s)

Planning for Long-Term Care When Retirement Planning

When you work with a financial advisor at Integrated Wealth Management, you can let go of the ‘what have I not considered’ fears that DIY planners often ponder. Our thorough process goes far further than working towards a magic number in your investment portfolio.

While many start considering long-term care in their 60s, starting in your early 50s may be necessary to get through underwriting. If you’re on the fence or unsure of your options, schedule a meeting with one of our financial advisors in Wilmington or Rehoboth Beach (or virtually) to see how our services can help you make decisions about long-term care with confidence.

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About Integrated Wealth Management

Integrated Wealth Management is owned by Burt Hutchinson, CPA, CFP®. We’re a CPA-led organization, meaning we’re here to handle your complex tax scenarios and provide cost-saving insight related to your financial plan.

We’re here to guide you through the 3 stages of retirement:

Uncertainty Stage: When you are within 10 years of retirement and have questions about how to make it work
Stability Stage: When you have reached the financial milestone to retire comfortably and confidently
Reflection Stage: When you are looking to leave a legacy

We are also here to provide experienced, empathetic support during times of loss, such as the death of a life partner. You need confidence and a sense of security to enjoy retirement. As fiduciaries with a fee-only structure, we never receive commissions. Free of ulterior motives, you can be sure we’re focused on your goals.

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Disclosure Statement:

This presentation is not an offer or a solicitation to buy or sell securities. The information contained in this presentation has been compiled from third-party sources and is believed to be reliable; however, its accuracy is not guaranteed and should not be relied upon in any way whatsoever. This presentation may not be construed as investment, tax, or legal advice and does not give investment recommendations. Any opinion included in this report constitutes our judgment as of the date of this report and is subject to change without notice.

Additional information, including management fees and expenses, is provided on our Form ADV Part 2 available upon request or at the SEC’s Investment Adviser Public Disclosure website, Past performance is not a guarantee of future results.