Long-Term Care insurance (LTCi), is an insurance that pays out a certain daily or monthly amount of money that can cover a variety of services to help meet the personal care needs of an individual over an extended time period.
Long-Term Care commonly involves non-skilled personal care assistance, such as supervision for cognitive impairment or help performing Activities of Daily Living (ADL’s) which are:
Bathing, Eating, Toileting, Dressing, Continence and Transferring.
Long term insurance by the numbers….
Sometimes explaining Long-Term Care can be challenging. There are many acronyms and concepts to understand. By looking at some claim averages first you can appreciate whether purchasing the insurance for a Long-Term Care event makes sense or not….
*52%: Percentage of people turning age 65 who will need some type of long-term care services in their lifetimes.
*47%: Estimated percentage of men 65 and older who will need long-term care during their lifetimes.
*1.5 years: Average number of years men will need long-term care.
*58%: Estimated percentage of women 65 and older who will need long-term care during their lifetimes.
*2.5 years: Average number of years women will need long-term care.
*14%: Percentage of people who will need long-term care for longer than five years.
Now, contrast these claim percentages above with homeowner’s insurance and term life insurance. Homeowners nationwide have a claim rate of just 5%** and term insurance policies have a claim rate of just 2%***
*Source- American Association for LTCI,2015-2016 Sourcebook
**Insurance Information Institute calculations, based on ISO®, a Verisk Analytics® business, data for homeowner’s insurance claims from 2013-2017 (see table above).
***Source: NAIC data, sourced from S&P Global Market Intelligence, Insurance Information Institute.
Looking to total portfolio assets to determine whether one should self-fund Long-Term Care or purchase insurance seems like the wrong way to go about it. Instead, it may make more sense to size up the Long-Term Care need on its own: the likelihood that you’ll need Long-Term Care, how much it’s apt to cost and for how long, whether you’d receive that care at home or free up your home as an asset to pay for it, and so forth. Armed with an understanding of those costs, you can then look at whether your portfolio, factoring in both the Long-Term Care costs and all other expenses, is up to the job.
