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How long-term care insurance can cut nursing home costs

Long-term care insurance can help cover the large and growing cost of nursing homes.  Maskot

It's important to plan for the cost of additional care in retirement because there's a better chance than not that you'll need it. According to the Administration for Community Living, you have a nearly 70% chance of needing long-term care when you turn 65. 

But "long-term care services, whether provided at home, in assisted living facilities or nursing homes, can be expensive," says Jeff Busch, financial advisor at Elysium Financial in South Jordan, Utah. He says that "these costs are not typically covered by health insurance or Medicare."

According to a Genworth survey, the cost of a private room in a nursing home can easily exceed $100,000 per year and semi-private rooms aren't much cheaper. Moreover, that price is expected to move in the upward direction for the foreseeable future. 

The good news is that with proper planning, you may be able to cut the cost of nursing home care. "Long-term care insurance is a valuable resource to help manage these expenses," says Busch. 

Purchase long-term care insurance now to help cover the growing cost of nursing home care

How long-term care insurance can cut nursing home costs

As Busch pointed out, long-term care insurance can be particularly useful as you plan to cover the cost of a nursing home. Here's how: 

It can pay for nursing home costs outright

If you plan accordingly, long-term care insurance may cover your entire nursing home expense. Here's what you can do make sure your policy covers your nursing home expenses: 

  • Determine your cost of care: The average person who needs nursing home care will need it for about a year. It's wise to plan for two years of coverage just in case you have an extended stay. Use the Genworth cost of care tool for an estimate for how much you'll pay for a nursing home in the future. A good rule of thumb is to plan to need a nursing home when you're 70. So, if you turn 70 in 2034, use the Genworth tool to determine the cost of a nursing home for then. 
  • Purchase a policy with enough coverage: Next, purchase a long-term care insurance policy with enough coverage to pay for your estimated nursing home expense. For example, if you estimate that a nursing home will cost you $125,000 per year, you should purchase a policy with $250,000 in coverage - enough to pay $125,000 per year for two years. 
  • Consider an inflation protection rider: Inflation protection riders help your long-term care benefits grow alongside inflation. Although these riders come with an additional cost, they're an effective way to protect the value of your policy. 

Purchase long-term care insurance now so you can afford the nursing home care you may need later 

It can act as a supplement to your retirement income

There's a good chance that you already have some form of retirement income in place. Just about every American can fall back on Social Security income. You may also have a 401k, IRA, pension, annuity or mix of these income sources. 

So, there's a strong probability that you won't need long-term care insurance to foot your entire nursing home bill. Moreover, by reducing your coverage to account for your retirement income, you may be able to reduce your premiums. 

Other ways long-term care insurance can protect you in retirement

"Without long-term care insurance, individuals and their families may need to use personal savings or sell assets to cover the cost of care," says Busch. "Long-term care insurance helps protect assets and preserves financial resources for other needs, such as passing on an inheritance to heirs or keeping up on maintenance on your home."

Moreover, with long-term care insurance, you may not need to move into a nursing home. Busch explains, "long-term care insurance can enable individuals to receive care in a setting of their choice, such as at home, which helps maintain a sense of independence and quality of life. This is especially important for those who prefer not to rely on family members for care." 

That noted, it's important to understand your coverage. For example, if you plan on aging in place, read your policy thoroughly to be sure your insurance provider will cover your expenses associated with doing so. 

Get long-term care insurance today

The bottom line

Nursing homes are expensive, but you may not have to foot the bill on your own. With proper planning and an effective long-term care policy, you can rest assured that you'll be able to afford the care you need when you need it. 

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