Long-Term Care Insurance Explained

Did you know the average cost of healthcare in retirement is $315k? And with increasing life expectancies, that number is likely to surge even higher. Long-term care (LTC) insurance is one way to gain financial protection against these high costs.

As you prepare for the future, understanding the importance of long-term care insurance and its benefits can help you make informed decisions in terms of what is right for you. In this blog post, we'll explain long-term care insurance and explore why you should consider including it in your financial strategy.

What are the benefits of LTC?

Help covering rising costs

Long-term care costs have been steadily increasing, making it essential to make a plan in advance.  Whether it's in-home care, assisted living facilities, or nursing homes, the expenses associated with long-term care services can quickly deplete your savings. Long-term care insurance helps mitigate the financial burden by providing coverage for these services, allowing you to preserve your assets and not worry about being a burden to your loved ones.

Protection for retirement savings

Your retirement savings are meant for your financial security during your golden years. However, a significant portion of those savings can be at risk if down the line you have long-term care needs. By investing in long-term care insurance, you can create a protective layer for your retirement savings. The insurance policy will cover a portion of the expenses, ensuring that your hard-earned savings remain intact for other important needs such as leaving a financial legacy for your heirs.

Independence and choice

With long-term care insurance you have the freedom to choose the type of care you desire. It provides the flexibility to receive care in various settings, including your own home, an assisted living facility, or a nursing home. This flexibility is important to many families, as it provides them options as retirees age.  With this coverage in place, you have the independence to make decisions about your care without being limited by financial constraints or family situation.

Relieving family burden

Long-term care needs can place a significant burden on your loved ones, both emotionally and financially. By having long-term care insurance, you alleviate some of this burden. The policy provides the financial means to secure professional care, easing the responsibility on your family members. It allows them to focus on providing emotional support rather than shouldering the entire financial obligation of your care.

Access to quality care

Long-term care insurance often provides access to a network of pre-screened and approved care providers. This ensures that you have access to quality care services and professionals who meet specific standards. Having this network of trusted providers simplifies the process of finding suitable care and ensures that you receive the necessary support when the need arises.

Peace of mind

The peace of mind long-term care offers sets it apart from many other products. By having this coverage, you can approach your retirement years with confidence, knowing that you have taken steps to protect the financial well-being of you and your family. Long-term care insurance provides peace of mind for you knowing that you are prepared and covered for potential long-term care needs.

What are the potential drawbacks?

High premium costs

One of the most significant drawbacks of long-term care insurance is the high premium costs. Premiums can be expensive, especially if you purchase a policy later in life. Additionally, premiums are not guaranteed to remain the same — they can increase over time, sometimes significantly, putting a strain on your finances.

Limited coverage

Long-term care insurance policies often come with restrictions and limitations on what they cover. Certain types of care or specific medical conditions may not be included, leading to potential gaps in coverage. It’s essential to thoroughly understand what your policy includes and excludes to avoid unexpected out-of-pocket expenses.

Use-it-or-lose-it

Unlike other types of insurance, long-term care insurance operates on a use-it-or-lose-it basis. If you never need long-term care, the money you paid in premiums is not returned to you or your heirs. Some newer policies offer partial refunds or benefits, but these options can typically come at a higher cost.

Complexity and confusion

The details and fine print of long-term care insurance policies can be complex and confusing. Understanding the terms, conditions, and various options requires careful reading and possibly professional advice. Misunderstanding the policy details can lead to unexpected issues when it comes time to use the benefits.

Health underwriting requirements

Obtaining long-term care insurance can be challenging if you have pre-existing health conditions. Many insurers require health screenings and may deny coverage based on your medical history or your age. This makes it important to consider purchasing a policy while you are still relatively young and healthy.

Potential for premium increases

Even after purchasing a policy, there is a risk that premiums will increase. Insurers have been known to raise premiums to maintain profitability, which can make it difficult for policyholders on fixed incomes to keep up with the payments.

Coming soon: A market-driven pension for long-term cash

Savvly is another option that can also help remove financial uncertainty in retirement. It’s the world’s first market-driven pension designed to give you easy and affordable financial security for life. Savvly payouts can be used for anything, from long-term care expenses to a vacation. And if you're younger than 80, you're eligible, no matter what. If you're worried long-term care insurance might not be enough, supplementing your policy with Savvly could be a good option to consider.