Around 70% of those 65 and older will require some type of long-term care as Americans live longer. Others will spend months or years in assisted living or a nursing home, while some people will only need part-time help at home to cook meals and clean restrooms. We must make plans for an old age that may be perfectly cheap or exorbitantly expensive because none of us knows what fate will befall us.

If you didn't already know, the expense of long-term care in the United States is exorbitantly high and rising more quickly than the rate of inflation. According to Genworth Financial, the average cost of a private room in a nursing home in 2019 was $102,200 per year, which is a 57 percent increase over the price in 2004. In 2019, the average cost of a year in an assisted living facility was $48,612 across the country, while in Washington, D.C., it cost $135,456. Additionally, staying at home isn't always less expensive. According to Genworth, the average cost of hiring a home health assistant on an hourly basis in 2019 was $52,624.

You might be thinking, but don't Medicare and Medicaid cover part of this? The quick response is no. Medicare does not cover any unskilled home health care, which accounts for the bulk of long-term care needs. Medicare will only pay for brief stays in nursing homes (100 days maximum) following surgery or a hospital stay.  Only after you have "paid down" your assets, that is, after all of your money has been spent, will Medicaid, which is for low-income Americans, pay for long-term care.

The high cost of long-term care combined with the unpredictability of ageing can make planning for it an extremely stressful, emotional, and challenging process. Just ask Stearns Financial Group CPA and certified financial planner Paula McMillan.

One of the least under our control is our health, which is the No. 1 retirement worry, according to McMillan, who also serves on the American Institute of CPAs' Personal Financial Specialist Committee.

Now is the time for adults in their 50s and 60s to make crucial and frequently difficult financial decisions regarding long-term care. Is it possible to just put as much money down as you can for retirement and hope that there will be enough left over to pay for nursing homes or home health aides? Or should you spend thousands of dollars a year on private long-term care insurance to have the assurance that, no matter what, you will be taken care of in your old age? Even so, are the premiums affordable? Let's research long-term care insurance more for you.

Regular health insurance versus long-term care insurance

The kind of long-term care offered by home health aides and nursing homes are not covered by health insurance, which is why you get it in the first place. Instead, health insurance covers the typical medical treatment including doctor visits, tests, prescription drugs, and hospital stays. You would need long-term care insurance as a separate policy for that.

There are some significant differences between long-term care insurance and health insurance. The issue of pre-existing conditions comes first. Because of a pre-existing medical condition, no American can now be denied health insurance thanks to the Affordable Care Act. The situation with long-term care insurance is different. You might not be approved for long-term care insurance if you've already received a dementia diagnosis, for example, or if you have a number of chronic illnesses (such as obesity, diabetes, or heart disease).

The price of care with or without insurance differs further. You will always spend more for medical care if you don't have health insurance since insurance firms negotiate lower costs for doctor's appointments and procedures. With long-term care, that is not the case. Regardless of whether you have long-term care insurance or not, nursing homes and home health aides cost the same.

One final distinction is that, unlike ordinary health insurance, once you get a long-term care insurance policy, you are essentially locked in for life.

The founder of Wealth Logic and certified financial advisor Allan Roth adds, "I can shop around for a better coverage and leave if my health insurance provider hikes up my cost. "You can't do that with long-term care insurance."

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Technically, you can get rid of your long-term care insurance and get a new one, but there will be a cost. You lose all of the premiums you've already paid, but more crucially, because you're older now, your new coverage probably costs considerably more. Which brings up the next important query.

What Is the Price of Long-Term Care Insurance?

Women always pay more since they live longer on average than males, especially in nursing homes, and because the cost rises with age. Because the insurance company anticipates you will have decades to pay into the system before you begin to use any benefits, the younger you are when you purchase health insurance, the less you will pay in annual premiums.

In addition, the cost of long-term care insurance varies based on how much and how long you want the policy to cover. For instance, a long-term care insurance policy may have something called a "elimination period" that works like a deductible. If your policy has a 90-day elimination period, as is customary, you are responsible for all expenditures associated with assisted living or home health care during the initial 90 days before your long-term care insurance begins to pay. You'll pay less in premiums the longer the elimination period is. (Some policies do waive the 90-day waiting period and permit the policyholder to spend a portion of the insurance benefit to pay for care in their own residences. However, they must wait an additional 90 days before utilising that whole benefit if they do decide to enter a nursing home or assisted living facility.)

To generate some typical numbers, we used Genworth's long-term care calculator. For instance, a 55-year-old man in Chicago would pay little less than $2,000 a year for an insurance that provides up to $200 in benefits each day for up to three years (a private room in a nursing home costs $280 per day). The annual cost for the same coverage for a woman of the same age would be about $2,400. The 90-day elimination period is mentioned in those quotes.

The same woman would pay $6,798 annually if she waited until she was 70 to purchase long-term care insurance. (It would cost $4,490 for a man in his 70s.) The reason for this is because the insurance provider is aware that it has less time to collect premiums before it might need to start disbursing benefits.

Why Purchasing Long-Term Care Insurance Is Beneficial
According to Roth of Wealth Logic, he doesn't have long-term care insurance for himself, but he recognises the benefits, chief among them peace of mind.

According to Roth, ensuring that their children will receive an inheritance upon their parents' passing is one of the main reasons people with children purchase long-term care insurance. Even those with significant retirement resources are concerned that a prolonged stay in a nursing home by one or both parents could wipe out all of their assets, leaving little for the grandchildren.

There are also valid concerns about burdening a spouse or kid who must serve as a carer.

If I'm diagnosed with Alzheimer's and don't have long-term care insurance, it might be up to my wife or other family members to provide the majority of the care, which is a challenging situation, says Roth.

Additionally, you could be more likely to get this policy if you are alone and have no one to act as your carer. It guarantees that you have a backup plan for paying for pricey in-home or nursing home care.

Long-term care insurance's drawbacks
Long-term care insurance has a high likelihood of costing you money, just like any other sort of insurance. RAND Corporation data indicates that, before they pass away, 56% of Americans will require at least one day of long-term care, either at home or in a special facility. In other words, 44% won't require any long-term care at all.

With an average stay of 301 days, 64.1% of women will at some point enter a nursing home. The figures are lower for men. Only 50.6 percent of men will spend an average of 141 days in a nursing facility. Again, this is a result of the longer lifespan of women in general. But for both men and women, the typical length of stay in a nursing home was barely one week.

According to RAND, just 5% of Americans will need the kind of prolonged nursing home care (four years or more) that long-term care insurance is really intended to cover.

The fact that long-term care insurance premiums aren't set and could increase is another disadvantage. That is exactly what transpired over the past eight to ten years, according to McMillan.

There used to be many businesses that offered long-term care insurance, but today there are only a few, according to McMillan. "That's because they initially priced it incorrectly,"

Long-term care insurance companies either went out of business or asked legislatures to allow them to hike their premiums when it became evident that they had drastically miscalculated the cost of long-term care. According to Roth, some of his clients' annual premiums quadrupled or jumped by 50%. Due to the requirement that insurers obtain regulatory clearance before raising rates in their state, this is less likely to occur today.

Do You Want to Buy It?
 

According to Roth, "Long-term care is a very sensitive and difficult subject, therefore many insurance brokers will play to your emotions. They'll remark, "I know this person who spent 12 years in a nursing home and it was so difficult for their family." However, you must consider the information and the likelihood that you will require it.

Therefore, if you have a strong retirement savings plan and aren't one of the unfortunate 5 percent who wind up in a nursing home for years on end, you should be able to meet your long-term care expenses.

McMillan asserts that deciding whether or not a client of hers should purchase long-term care insurance is "definitely a case by case basis." Her main deciding factors for purchasing it or not are:

• Health, including your current health issues and your hereditary propensity to develop a chronic illness (for example, does Alzheimer's run in your family?)
   
• Financial situation (Are you able to afford it without dipping into your retirement funds? Do you already have your retirement funds set up?
   
• Psychology: How at ease are you with ambiguity?
   

Various LTC Insurance Alternatives
 

Some individuals, like Roth, intend to "self-insure." That's just a fancy way of saying they intend to use their retirement funds to cover potential long-term care expenses. People like Roth would rather invest the money that would go towards a long-term care premium in the hopes that it will be more than enough to cover long-term care expenditures in the future because the cost of long-term care is the same whether it is paid for by insurance or "out of pocket."

As we previously indicated, if you meet certain eligibility standards, specifically that your income and assets are below certain thresholds specified by each state, then state-run Medicaid programmes will also cover long-term care services. That implies that before Medicaid begins to pay benefits, middle- to high-income workers must exhaust all of their retirement assets. Additionally, not every care home and service accepts Medicaid.

Additionally, a number of "hybrid" policies that combine the advantages of both life insurance and long-term care insurance are currently on the market. According to McMillan, these products are really much more prevalent now than conventional long-term care insurance, but consumers should exercise caution. Read the tiny print because hybrid policies do cost significantly more than conventional long-term care insurance even though they have some great benefits like the opportunity to withdraw money from the policy or receive an annuity.