Unless you maintain your health and mobility for the rest of your life, you will likely eventually need some form of long-term care. Government estimates suggest that up to 70% of older adults develop a need for long-term services and support before they die. Yet most adults have taken no steps to prepare, according to a Kaiser Family Foundation survey. The numbers are alarming. The average cost of a private nursing-home room exceeds $100,000 annually, according to the Genworth Cost of Care Survey. A home health aide costs more than $60,000 a year on average. Medicare does not cover long-term care expenses, so many Americans must fund their care themselves.

Options include traditional long-term care insurance purchased privately or as an employee benefit, a hybrid insurance policy or annuity with a long-term care component, or self-funding from savings. If you exhaust your assets, you may qualify for Medicaid. If you cannot adequately fund long-term care expenses, you may have to rely on family, potentially disrupting their lives and jeopardizing their financial security. Here we explore ways to cover the costs.

TRADITIONAL INSURANCE
According to representatives of the American Association for Long-Term Care Insurance (AALTCI), the long-term care insurance market suits a small percentage of consumers. LIMRA estimates that only 3% to 4% of people over 50 have long-term care insurance. However, more recent AARP data show a growing preference for hybrid policies combining life and long-term care benefits (AARP, 2021).

Long-term care insurance is not inexpensive. You must also apply at an age when you can obtain coverage, be in good health, and have sufficient financial resources, which requires planning ahead. Once the health hurdle is cleared, cost is the main obstacle. Incorrect pricing decisions and inaccurate forecasts reduced the number of insurers offering new policies. Currently, only six companies offer them: Mutual of Omaha, Thrivent, National Guardian Life, New York Life, Northwestern, and Bankers Life.

If you want long-term care insurance, purchasing a policy in your 40s or early 50s can keep premiums lower. The older you are, the higher the premiums and the greater the likelihood that you cannot obtain coverage. According to AALTCI, 13.9% of applicants in their 50s are declined, compared with almost 45% in their 70s. Premiums have also increased significantly over time, doubling in some cases, although conditions may stabilize as insurers adjust their pricing strategies.

HYBRID INSURANCE
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the number of companies offering long-term care insurance has declined, more companies have incorporated long-term care coverage into other policies, such as life insurance. These policies allow some or all of the death benefit to cover care expenses. Consumers purchased more than 11 times as many hybrid policies as traditional policies in 2022, spending over $4 billion in hybrid-policy premiums compared with $138 million for traditional policies (LIMRA, 2022).

ANNUITIES AND SELF-FUNDING
Another hybrid product is an annuity with a long-term care component. These products are more accessible to older people and have fewer health restrictions. People with sufficient assets can also choose to self-fund care. Having between $300,000 and $700,000 in liquid assets is recommended to cover potential costs.

CONCLUSION
Long-term care planning is crucial to avoiding future financial burdens. Whether through traditional or hybrid insurance or self-funding strategies, exploring available options and consulting financial advisers can make a difference in securing your future.