Long-term care insurance could help you live in dignity if an illness, accident or simply aging makes it difficult to take care of yourself. So what's stopping you from buying it?
Chances are, no matter what your reason, Scott Halliwell has probably heard it already.
"People share lots of reasons for not buying long-term care insurance or for putting it off," says Halliwell, a certified financial planner practitioner with USAA. "But when you consider that a need for long-term care could come with a price tag of several hundred thousand dollars, they're really taking a big risk by not addressing it."
Here, Halliwell responds to four common excuses he regularly hears.
1. I'm never going into a nursing home. "This isn't about what you don't want to do, it's about what statistics say you're likely to do," Halliwell says. "If you took a poll of nursing home residents or those receiving care at home from a professional caregiver, how many do you think would say it was something they wanted?"
Want it or not, the fact is, a lot of us will need care at some point. According to a 2009 Department of Health and Human Services study, at least 70% of people over age 65 will require long-term care services during their lifetimes. Growing life expectancies are one factor driving that number: A 65-year-old married couple has a nearly 50% chance of at least one spouse reaching age 90 and a 20% chance of one surviving to 95, according to LIMRA, a financial services research organization.
2. My spouse and kids will take care of me. "People always say this, but I don't think they ever stop to think about what that really means," Halliwell says. A long-term care need is typically the result of cognitive impairment or one's inability to perform two or three of the six activities of daily living. Included on the standard list are bathing, control over bodily functions, dressing, eating, getting on and off the toilet, and "transferring" -- walking or being able to move oneself between bed and wheelchair.
"Think about this list," Halliwell asks. "Are any of these activities something you want a family member to help you with?"
Even if you're comfortable with this, are you sure your family is?
"Just because you think they should take care of you doesn't mean your children will eagerly step up to the job," Halliwell says. "If your spouse or children aren't on the same page as you with this one, you're potentially setting your family up for really awkward and stressful moments."
3. I can't afford it. "While you might not be able to afford a top-of-the-line policy, you can probably design a policy that provides at least some level of coverage and still fits in your budget," Halliwell says. "It doesn't have to be an all-or-none proposition."
One way to make long-term care more affordable is by adjusting the benefits of the policy. For example, policy costs can typically be reduced by decreasing the benefit period, the daily benefit amount or the level of cost-of-living adjustments. Increasing the elimination period -- the initial time when you're responsible for all costs -- can also help reduce the cost of a long-term care policy.
4. I have health insurance ... or TRICARE ... or Medicare. "While lots of people assume otherwise, none of these plans provide long-term care benefits," Halliwell says.
And don't base your long-term care plan on Medicaid. The state-administered program is designed as a safety net for financially needy individuals. According to the U.S. Department of Health and Human Services, Medicaid applicants in most states are disqualified if they have "countable" assets of more than $2,000 ($3,000 if they're married).
Yet there's a growing exception to that rule. To encourage residents to plan ahead, most states now offer partnership programs. They provide Medicaid long-term care benefits to people who haven't spent all their assets, provided they had bought and then exhausted the benefits of a qualifying long-term care policy.
No doubt, the world of long-term care insurance can seem overwhelming for the uninitiated. Similar to many other financial topics, finding a solution starts with a plan. It helps to start planning in your 40s or 50s.