Umbrella LTC

Long-Term Care Insurance

Long-term care (LTC) has been called "the greatest uninsured financial risk today." That’s because the majority of costs for extended care needed during recuperation from strokes, accidents, illnesses, and operations are not covered by health insurance or Medicare. Without LTC insurance, these costs are paid from one's personal savings and assets.

Only LTC insurance provides coverage for quality LTC that may be needed at any time in life. Today’s policies also recognize that most people prefer to receive care at home and offer flexible cash payments so that even friends and family members can be compensated for providing assistance. And because the first claim might be years into the future, it's essential to obtain your policy from a trusted source to ensure that customer service and insurer funding will be available at the time of need.

In both the health care and financial planning arenas, there is a great deal of confusion about the wisdom of purchasing LTC insurance.  Here are some key factors that should be taken into account before making any decision about this important coverage:

Who will need LTC?
  • The chances of needing LTC after age 65 are 50%.
  • 10% will need care for less than one year, 50% for more than one year, 20% for two to five years, and 20% for five+ years (especially in cases of Alzheimer's disease and other dementia).
  • Extended care can be needed at any age: 40% of those receiving LTC are under the age of 65, often due to accidents and early-onset health conditions.

Source: Dr. Peter Kemper, Professor of Health Policy, Administration, Demography at Pennsylvania State University

How much does LTC cost?
The average annual cost of care in Wisconsin is:

  • $87,783 for a private nursing facility.
  • $46,904 for 44 hours/week of home health care (which translates into $168,000 for 24/7 home care).
  • $42,600 for a private one-bedroom assisted living facility.

Source:  Annual Cost of Care Survey 2011, Genworth Financial

Does it make sense to self-fund LTC?
Assuming LTC is needed for an average of four years, in 2010 dollars:

  • A private nursing facility will cost $351,132.
  • 44 hours/week of home health care will cost $187,616.
  • 24/7 home health care will cost $672,000.
  • A private one-bedroom assisted living facility will cost $170,400.

These costs assume only one individual will need care; costs will increase if both spouses require care. The above costs are for basic care only and does not include special services, medications, and other expenses associated with extended personal care. All such costs are funded by after-tax dollars, and the actual lifetime cost of care may be much higher when rising costs/inflation and loss of investment income are factored in.