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Do You Need Extended Care Insurance?

Planning for the future isn’t something you often think about. No one wants to consider that once old, you may need physical help or assisted living. But this is a reality for many.

An estimated 12 million Americans needed long-term care in 2007. Most but not all persons in need of long-term care are elderly. About 63 percent are 65 and older (6.3 million), but it may surprise you to learn that the rest are 64 years of age and younger (3.7 million).

The Cost of Assisted Care

As you probably can guess, long-term care isn’t cheap. The annual median rate for nursing-home care is $73,000  and in some states it can reach a high of $162,425. Even if you’re a resident of an assisted living facility, the average rate is still $41,000 and Medicaid only covers about 49 percent of this cost.

What is Extended Care Insurance?

Because of these high costs, you might consider buying extended care insurance. Extended care insurance (sometimes called long-term care insurance) is an insurance product, sold in the United States, United Kingdom and Canada, that helps you pay for those high costs later in life. Extended care insurance covers things generally not covered by health insurance, Medicare, or Medicaid. Unlike traditional health insurance, long-term care insurance is designed to cover long-term services and supports, including personal and custodial care in a variety of settings such as your home, a community organization, or other facility.

When you retire, you probably plan on your Social Security check and Medicare for financial support, plus perhaps the sale of your home to pay for care. But consider this: If you sell your home for $400,000 and nursing care costs $6,000 per month, your money will run out in 66 months. Therefore, you only have five and a half years to stay in that nursing home. With people living longer, that might not be enough.

Extended care insurance policies reimburse policyholders a daily amount for services to assist them with activities of daily living such as bathing, dressing, and/or eating. You can select a range of care options and benefits that allow you to get the services you need, where you need them.

The cost of insurance is fairly inexpensive if you purchase a plan while young. For a 25 year-old, a policy that provides for $164,000 in total benefits over time before it runs out, with the option to increase coverage in the future, costs roughly $635 annually, or about $53 a month. However, that cost will increase to as much as $4,824, which is $402 a month, if you wait to buy it after you retire.

Retirement is difficult to plan for with saving money, planning, and just living life. With medical bills, housing bills, and private bills all increasing, it is hard for retirees to remain financially stable with a steady source of income. Extended care insurance is there to

 be a financial safety blanket and give relief to those individuals who are retired or who are about to retire.

If you have any questions about extended care insurance, elder care, or estate planning, please contact us for help.

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