For many of us, planning for long-term care begins with an accident, the onset of a sudden illness, or in dealing with the growing needs of aging parents or other loved ones.

While no one likes to think about being unable to care for themselves or a loved one, 70% of people reaching the age of 65 will require assistance with basic needs – such as eating, dressing and bathing – in their lifetime.[1]

That’s why it’s so important to put a plan in place for how you and your family will manage a long-term care event, well before one occurs.

We insure ourselves for many possible unknown future events. We buy health insurance, car insurance and home insurance. Not because we plan on suffering catastrophic losses, but because we then have a plan for how to handle one if it does occur. The same should be true for long-term care. What many people don’t realize is that there are other long-term care solutions beyond just traditional insurance.

–Rich Guerrini, President & CEO of PNC Investments

Unfortunately, for those without a plan, a sudden need for long-term care can completely disrupt the entire family as emotional, logistical and financial decisions may need to be made very quickly.

Are You Prepared

Long-term care expenses for you, your spouse or others who depend on you should be a key component of your retirement plan.

And planning should include the financial aspects of care, as well as indicate who may be able to provide that care.

While nearby family members or friends may be able to help with some tasks, many people will begin to need the assistance of professional home healthcare aides, which may eventually lead to full-time nursing home care. The costs can escalate quickly.

What many people fail to understand is that health insurance and Medicare do not cover long-term care expenses, and Medicaid is only available to lower-income individuals who have no assets. According to Genworth’s 2021 Cost of Care Survey, the average cost of a home healthcare aide is $61,776; an assisted living facility costs $54,000; and a private room in a nursing home could run as high as $108,405. These costs continue to increase each year.

What Are Your Options To Pay For Long-Term Care

Generally, there are three options to pay for long-term care costs: your personal savings, government assistance or an insurance product. Let’s explore each of these.

Your Personal Savings: Is your retirement plan built to cover these potentially large expenses for several years for you, your spouse or both of you? The average need for long-term care service is three years. Women tend to need care for a longer period of time (3.7 years) than men (2.2 years). With potential annual costs estimated between $50,000 and $100,000 per person, will you have enough to sustain your other needs or goals, including leaving assets to your loved ones? Also, consider when you might need to begin long-term care services and how long the need may last. For those suffering from cognitive decline – such as dementia or Alzheimer’s disease – versus a physical issue, the need for care may be considerably longer.

Government Assistance: Medicare does not cover long-term care costs and only provides limited benefits for short-term care after a hospital stay. To be eligible for Medicaid, you need to qualify based on your income and assets, which vary from state to state. But this program is generally only available to low-income individuals and families, and the state may determine what facilities are available to provide the care you need. If you qualify for Medicaid, the state may attempt to recoup the cost of your care upon death, which may include selling the family home and collecting the proceeds of any life insurance policies, preventing you from leaving anything for your heirs.

Long-term Care Insurance: There are typically three types of insurance available to cover a long-term care event: a traditional long-term care policy, a hybrid long-term care/life insurance policy and a benefits rider attached to an existing insurance policy.

  • Traditional Long-term Care Policy: This type of insurance is typically expensive, and the premiums are not locked in, which means the costs can rise every year. If you cancel the policy, you will lose all the premiums paid.
  • Hybrid Policy: This type of insurance provides both long-term care and a life insurance benefit. You can choose the amount of insurance you wish to have and make one full premium payment or spread it over a multi-year period between three and 10 years. You can get your money back any time after the premium is paid in full. If you never use the long-term care benefit, the full amount of premiums paid is passed on to your beneficiaries. But even if you do use the long-term care benefits, there will still be a tax-free death benefit that gets paid out from the life insurance portion of the policy.
  • Benefits Rider: If leaving money to your beneficiaries is important to you, then a benefits rider may be a good option.  It allows you to add a rider to your existing life insurance policy allowing you to borrow against the death benefit tax-free to cover long-term care expenses. However, it may limit what is left for your heirs to inherit.

Protect Your Family and Your Assets

Deciding what type of long-term care insurance is right for you and your family is a very personal decision.

You should weigh all factors such as what you can afford, the kind of care you want to have, and the ability of your family or friends to share in your care. Having these conversations with your loved ones now can help you and your family prepare for the future.

A PNCI Financial Advisor can review your current financial situation, your existing insurance policies and explain long-term care options available to you. Call or stop by your nearest PNC branch to make an appointment with a PNC Investments Financial Advisor or call 855-PNC-INVEST (1-855-762-4683) today.