Long Term Care Insurance Versus Self Insuring

In this video, Ryan from Allied Wealth discusses the dilemma of self-insuring versus buying long term care insurance for one’s golden years. He highlights the increasing need for long-term care due to medical advancements, emphasizing the financial implications of different care options. Ryan provides cost estimates for home care, assisted living, and nursing homes, suggesting that self-insuring is feasible if one can afford to spend $324,000 without impacting their spouse’s lifestyle.

However, he advises considering long-term care insurance if this would be a significant burden. Ryan also mentions the limitations of Medicare, the potential for rate increases, and alternative options like asset-based policies and annuities. Overall, the video offers valuable insights for individuals navigating the decision-making process surrounding long-term care.

Long Term Care Insurance versus Self-Insuring

Are you considering buying long-term care insurance in your golden years? Well, if you are, we provide some great information on self-insuring versus buying long term care insurance. In this article, we will explore the pros and cons of each option and help you make an informed decision.

The Increasing Need for Long Term Care Insurance

According to a Genworth survey conducted in 2021, the chances of needing long-term care in your golden years have significantly increased. The survey found that 7 out of 10 people will need long-term care insurance or have a long-term care need. This is a substantial increase from 15 years ago when the number was 5 out of 10 people. Advances in medical technology and procedures have contributed to longer life expectancy, thereby increasing the likelihood of requiring long-term care.

Understanding the Costs

Before delving into the options of long-term care insurance and self-insuring, it is crucial to understand the costs involved. The cost of having someone come to your home as a home health aide is approximately $62,000 per year. Opting for an assisted living facility is cheaper, averaging around $54,000 per year. However, a private room in a nursing home facility can cost as much as $108,000 per year.

Considering the Average Length of Stay

On average, a person’s stay in a long-term care facility is about three years. While this number may be lower for some individuals, it is higher for those with Alzheimer’s disease. Based on this average, let’s examine the costs. If you choose to have someone come to your home, the cost for three years would be $186,000. Assisted living for the same duration would amount to $162,000, and a private room in a nursing home facility would reach $324,000.

To Buy or Self-Insure?

The decision to buy long term care insurance or self-insure depends on your financial situation. If you can afford to pay $324,000 out of your assets without impacting the lifestyle of your surviving spouse, then self-insuring may be an option. Self-insuring means relying on your own resources to cover the costs of long-term care. This approach requires a significant amount of savings or assets that can be used for this purpose.

However, if spending $324,000 would adversely affect your surviving spouse’s lifestyle, then long term care insurance should be considered. Long term care insurance helps mitigate the financial burden by providing coverage for long-term care expenses. Keep in mind that long-term care insurance can be expensive, but it can offer peace of mind in case the need for care arises.

Factors to Consider

When evaluating long term care insurance options, it’s essential to consider factors such as rate increases over time. Some policies may experience premium hikes, so it’s crucial to review the terms and conditions. Additionally, it’s important to note that Medicare does not cover long term care insurance. Medicaid does provide coverage, but it requires spending down all your assets, which may not be ideal for many individuals.

Newer options such as asset-based long-term care or annuities with income riders can also be explored. These alternatives offer different approaches to securing long-term care benefits. Thoroughly investigating all available options is crucial to making an informed decision.

The Importance of Healthcare Planning

Healthcare costs can be significant and pose a threat to the long-term viability of your financial resources. Therefore, healthcare planning should be an integral part of a comprehensive financial plan. The expenses associated with healthcare can endure throughout your lifetime and may even surpass your accumulated wealth. Taking the time to thoroughly assess your options and consult with financial experts is essential to ensure financial security in your golden years.

In conclusion, choosing between long term care insurance and self-insuring requires careful consideration of your financial situation and future needs. Analyzing costs, understanding the average length of stay, and evaluating the affordability of self-insurance are crucial steps. Consulting with professionals and exploring various insurance options will provide you with the necessary knowledge to make an informed decision. Remember, healthcare planning is a vital component of your overall financial strategy, ensuring the long-term viability of your assets.

Also read: How Much Do You Pay To Your Financial Advisor


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