How Much Does Long Term Care Cost?
Think of how to pay for your long term care in two ways; money and time.
You can pay for someone's time to care for you (paid caregiver) or someone (usually a family member) can take their time away from something else (their job, family, friends, hobbies, etc.) to care for you. There's a cost either way.
Care is usually used needed in staircase fashion, in incremental steps. The individual might only need help a few hours per day (with meds, food, getting to appointments/shopping, bathing, to be checked on, etc.). Because age is usually the cause of needing care, the older you get the more care you need (8 hours, 12 hours, round the clock care, facility supervised care). That gets progressively expensive.
According to the annual GenWorth cost of long term care survey, the cost of hiring an agency to provide a home health aide is $30/hour (4-hour minimum per day). You can hire a caregiver directly for less but you would be responsible for care coverage when that aide is sick, on vacation, or leaves (for whatever reason).
The national average for an assisted living facility is $64,000/year (private room). A nursing home semi-private room is $104,000/year. Baby Boom generation demand is causing long term inflation to rise faster than general inflation and that is expected to continue.
According to the Association of Long Term Care Insurance, there's approximately a 1 in 5 chance of needing care into the fourth year. You can do the math but it gets expensive.
How to Pay for Long Term Care
Two strategies; the first 120 days and thereafter.
Many coverage strategies only start to pay on the 91st day. This is the "elimination period" (similar to a deductible--like on your automobile policy-- but the long term care industry uses days instead of dollars). If you have a 90-day elimination period, you'll have to come out of pocket to pay for your first 90 days of care.
But, even if you have coverage of some kind, it will take approximately another 30-40 days (perhaps longer) for the insurance company to process your first claim and reimburse you. From a cash flow perspective, you'll need at least 120 days of care cash, above your normal expenses.
Long term care expenses are in ADDITION to your normal expenses (except, generally, if you need facility care in which case you may sell your home).
There are many strategies to manage long term care expense risk. That's what we do.
You do not want to be a burden on your family and your family would prefer to oversee your care than be the direct care providers. That is the central point and the reason people consider buying into some type of strategy to address this problem.