Long-Term Care: Avoid These 3 Common Mistakes

Long-Term Care InsuranceLong-term care insurance can be used to help retirees protect themselves from incredibly high costs they may face as they grow older and need more daily health support. But there are three mistakes that commonly grip many of those who are considering it.

Mistake 1: Waiting Too LongLong-term care insurance can help reduce the costs of assisted living, but one of the biggest mistakes people face is waiting too long to consider it.

Most people don’t begin even thinking about it until they reach their 60s, but by then, the prices already have begun to rise.

Mistake 1: Waiting Too LongAARP shows how dramatically the cost can rise if the initial purchase is delayed:

Knowing most individuals don’t use the coverage until their 70s or 80s, those thousands of dollars can make a massive difference in cost.

Mistake 1: Waiting Too LongFor example, if two people needed coverage at 80, the person who started at age 60 would’ve paid 20% less than someone who started at age 70:

Mistake 2: Not Considering the Real CostThe second major mistake people can make is either over- or underestimating the cost of the policy they may need.

For example, an individual in Pennsylvania can expect to pay nearly $105,000 a year for a private room in a nursing home. But three states over, in Illinois, the cost is $70,500, or 30% less.

Mistake 2: Not Considering the Real Cost

Data Source: Genworth Cost of Care Study 2013

Mistake 2: Not Considering the Real Cost

Knowing that, it’s critical for individuals to really consider the state in which they may ultimately retire and gauge their coverage based on the details of that state, as the details vary widely.

Image Source: Flickr / The U.S. Army

Mistake 3: Not Knowing the DetailsThe final mistake an individual can make is not carefully reading through and understanding the differences between policies when selecting which to chose.

As with any major decision, understanding the fine print in the contract is critical.

Mistake 3: Not Knowing the DetailsFor example, a daily insurance benefit covers only the days someone comes by to help you. A $250 daily benefit doesn’t mean you receive $7,500 a month (30 x $250), but instead you get the benefit for the number of days a home-care aide visited. If the aide came 20 days and charged $300 a day, you would receive only $5,000 in coverage and would have to pay $1,000 out of pocket.

Mistake 3: Not Knowing the DetailsBut in the same way, if you had a monthly benefit of $7,500, you would be more than covered for the $6,000 the aide charged.

Those details are just scratching the surface. You’ll also need to consider things such as automatic inflation protection and future purchase options.

Mistake 3: Not Knowing the DetailsAll that is to say, it’s vital to take time and truly understand the details of each and every policy. Long-term care insurance can undoubtedly be a valuable resource for many, but common mistakes can often make tough situations even tougher.

Long-term care insurance is one thing, but retirement itself is

even bigger. And we’ve found a simple way to take advantage of an IRS rule that ensures you

retire comfortably.