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There are a lot of important decisions to make leading up to retirement. Not only do you need to decide which investments and savings goals align with your financial plan, but you also need to make sure that you have the right types of healthcare insurance coverage in place, too. After all, aging comes with unique health challenges — and the costs of this type of care can have a devastating impact on your finances during retirement.
For example, a large percentage of retirees will need long-term care at some point after the age of 65 — but Medicare and Medicare supplemental insurance policies typically won’t cover those types of costs. And, if you have to pay out of pocket for long-term care, the costs could add up to thousands, or tens of thousands, of dollars or more each month.
You won’t have to pay for long-term care out of pocket, though, if you purchase a long-term care insurance policy. This type of coverage is used to help cover the costs of care received in nursing homes, specialty care facilities, assisted living facilities and even hospice care. But while this type of coverage can be crucial for many retirees, it’s important to understand the potential benefits and downsides before purchasing a policy this year.
Learn more about your long-term care insurance options online here.
Pros of purchasing long-term care insurance in 2024
If you’re wondering whether it makes sense to purchase a long-term care insurance policy this year, the potential benefits of doing so include:
Financial security
One of the main benefits of a long-term care insurance policy is that it acts as a robust safety net for those anticipating the need for extended care due to aging, chronic illness or disability. The primary advantage lies in its ability to shield assets by covering the exorbitant costs associated with long-term care services.
Whether the long-term care occurs in a nursing home, assisted living facility or in-home care, having long-term care insurance ensures that the financial burden is mitigated.
Find out how the right long-term care insurance policy could benefit you here.
Peace of mind for loved ones
Beyond the financial implications, long-term care insurance offers intangible benefits, like the assurance that one’s care needs are covered. This helps to alleviate the emotional and financial burden on family members related to these types of aging healthcare issues. Rather than searching for ways to pay for long-term care costs, your loved ones can focus on providing emotional support during challenging times, knowing that the financial intricacies related to this type of care are covered by the insurance policy.
Inflation protection
Persistent inflation has been an issue in recent years, impacting the cost of groceries, gas and other consumer goods. But inflation doesn’t just cause the cost of your food, housing or fuel to increase; it also impacts the cost of healthcare. And that includes the cost of long-term care.
But one big benefit of long-term care insurance is that many modern policies integrate inflation protection, a feature that adjusts benefits over time to keep pace with the escalating costs of healthcare. This protection ensures that the coverage purchased today remains meaningful in the face of future inflation.
Customizable coverage
Many long-term care insurance policies will also offer a high degree of customization, which can be a big draw considering that coverage needs can vary significantly from one person to the next.
For example, policyholders can tailor coverage to their specific requirements, choosing the length of coverage, the daily benefit amount and other features that align with their financial situation and preferences. This type of customization ensures that the policy you purchase aligns with your unique needs and wants.
Potential tax benefits
In some cases, the premiums you pay for long-term care insurance may be tax-deductible. In turn, the tax advantages associated with these policies can contribute to reducing the overall financial impact, making them a more attractive option in certain cases.
Cons of purchasing long-term care insurance in 2024
And, before you purchase a policy, it may also help to consider the potential downsides of this type of coverage, which include:
The cost of the premiums
A primary concern for individuals considering long-term care insurance is thecost of premiums. The ongoing financial commitment can be significant and there is always the risk of paying for coverage that may never be utilized. So, it can be crucial to conduct a thorough evaluation of your budget and assess whether the ongoing premiums are financially sustainable in the long term.
That said, the coverage can be well worth it for the right person despite the cost of your premiums. After all, the cost of long-term care is incredibly high on average — and the cost of this type of care is only expected to climb.
The qualifications and underwriting
Obtaining long-term care insurance becomes increasingly challenging as you age or if pre-existing health conditions are present. Some people may find it difficult to qualify for coverage or may face higher premiums based on their health statuses. Buying a policy when you’re younger and in good health can help you avoid some of these issues, but it’s still imperative to consider these factors, especially when contemplating long-term care insurance later in life.
Missed investment opportunities
Depending on your perspective, you may find that the funds allocated to long-term care insurance premiums could be invested elsewhere to potentially yield better returns. While this comes with its own set of risks, considering alternative investment strategies as part of an overall financial plan is a prudent approach.
The bottom line
The decision to purchase long-term care insurance this year requires a comprehensive analysis of the pros and cons. After all, striking a balance between financial security and the potential costs is key to securing a stable and worry-free future, and assessing your current financial situation, health conditions and preferences is imperative in making an informed choice.
Angelica Leicht is senior editor for Managing Your Money, where she writes and edits articles on a range of personal finance topics. Angelica previously held editing roles at The Simple Dollar, Interest, HousingWire and other financial publications.
