Paying for Long-Term Care—What You Should Know

By: Dr. Macie Smith

Non-medical supportive services are the long-term care services that many seniors need to maintain their quality of life as they age. The conundrum is that the cost of long-term care can have an astronomical price tag—to the sum of approximately $4,500 - $9,5000 per month¹. Whole life insurance is one way to mitigate some of those costs.

We are aging in droves; approximately 10,000 Americans are turning 65 every day¹. To date, there are upwards of 52 million Americans over the age of 65, and this number is expected to double within the coming decades². As Americans age, their risk for developing chronic, potentially life-limiting illnesses increases exponentially. Approximately 92% of older adults live with at least one chronic illness, while about 77% live with at least two chronic illnesses³.

Many of us are under the assumption that, once we reach the age of 65, Medicare will provide for most, if not all, long-term care needs. The explicit reality is that it doesn’t cover long-term services and supports (LTSS).

Because there are limited financial resources available to pay for the long-term care services seniors with chronic illnesses need, family members often bear the brunt of the responsibility for providing that care, which is not an easy task. I can tell you from personal experience that people rarely plan for long-term care, especially when they don’t live near their older loved ones. I lived several cities away from my grandmother and never had an inkling that I would remotely be in a position of caregiver. It wasn’t until my grandmother’s dementia progressed that I realized I had to offer support—and quickly. Luckily my dad and sister lived close by, but we still experienced major challenges; one being the cost of in-home care and other long-term care services. Not only did we not plan for my grandmother’s care, but as a family, we didn’t know how or when to plan.

So the question becomes, when is the right time to plan for long-term care? I suggest sooner rather than later. As I mentioned, long-term care involving out-of-home placement, such as assisted living facilities or skilled nursing facilities, can cost anywhere from $4,500 - $9,5000 per month, depending on where you live. But even long-term care support that is provided within the home, such as having a professional caregiver visit to assist with daily living and provide supervision and companionship, can cost around $24 per hour⁴. For the average senior living on a fixed income, the cost of long-term care is unaffordable. And that’s where we look at alternative options.

There are a few options I recommend when looking at alternatives to paying out-of-pocket for LTSS. You can sell your home and use the cash to pay for your care. You can enlist the help of an elder attorney to do Medicaid planning. Or you can consider a whole life insurance policy. 

While more than 50% of individuals over the age of 65 have reported having some type of life insurance, it’s important to note that not all life insurance policies are created equal⁵. There is a difference between whole life insurance and term life insurance. Term life insurance provides coverage for a specified period of time and includes a death benefit, whereas whole life insurance offers lifelong coverage, includes a death benefit, and typically has a cash value account that builds interest.  

So, why do I recommend a whole life insurance policy when planning for long-term care? Whole life insurance can provide protection for your entire life and does not terminate after a certain time period. Additionally, depending on the features of your whole life insurance policy, your cash value savings account will build interest, and while you are alive, you may have the opportunity to make withdrawals and/or take out loans against the cash value that has accrued. This is an ideal way to fund your long-term care needs if you meet the criteria outlined in your whole life insurance policy.

I highly recommend contacting a licensed whole life insurance advisor to weigh your options. You’ll want to make sure that you are open and honest with your advisor about your immediate and long-term needs. Be open to alternatives and ask lots of questions to ensure all your concerns are addressed. And be sure to inquire about the benefits and risks and how your death benefit will be affected if you make any withdrawals or loans on your cash value savings account. Taking this information into consideration will better prepare you to make an informed decision about planning for long-term care.

Paid Endorsement

Sources:
¹ (DCD), D. C. D. (2022, April 27). Aging. HHS.gov. Retrieved February 22, 2023, from https://www.hhs.gov/aging/index.html 

² Mather, M., Kilduff, L., & Scommegna, P. (2019, July 15). Fact sheet: Aging in the United States. PRB. Retrieved February 22, 2023, from https://www.prb.org/resources/fact-sheet-aging-in-the-united-states/ 

³ American Psychological Association. (2021). Older adults' health and age-related changes. American Psychological Association. Retrieved February 22, 2023, from https://www.apa.org/pi/aging/resources/guides/older#:~:text=Physical%20health%201%20Approximately%2092%20percent%20of%20older,HIV%2C%20and%20this%20number%20is%20increasing.%20More%20items 

⁴ Baker, S. (2022, March 23). What is the cost of in-home care? ConsumerAffairs. Retrieved February 22, 2023, from https://www.consumeraffairs.com/health/in-home-care-cost.html 

⁵ Steve Wood. (2022). 2022 Insurance Barometer Study. Washington, DC, Washington; Life Happens. Retrieved February 22, 2023, from https://portal.equitable.com/appentry/EDoxRedirect?node_id=A2020082700016.