In 2008, a majority of the people who could benefit from traditional long term care insurance once again chose not to purchase it. In fact, 1% fewer Americans purchased individual LTC insurance from participating carriers in 2007 than in 2006, according to LIMRA International.
Whether it was because they rejected traditional LTC insurance; because they wanted to retain access to their assets; or because they didn’t believe they would have a need for LTC, many chose to self-insure-or were self-insuring by default, through inaction.
However, at least 70% of people over age 65 will need some LTC services at some point in their lives, according to the U.S. Department of Health and Human Services, which underscores how financially vulnerable people without a carefully considered LTC plan will be.
With economists warning of a prolonged recession, many Americans are starting the New Year facing significant hits to their savings and investments. In 2009, many more will be reconsidering their retirement security and their ability to self-insure the amount of any required LTC services. Along with the growing awareness among Americans of the reality of longevity risk comes an awareness of the costs associated with it.
In fact, now 58% of all adults think it is likely that they will need LTC services at some point in their lives, while 61% say they are concerned that they will be responsible in the future for providing either financial assistance or personal care to a loved one who needs LTC services, according to a recent survey by the LIFE Foundation, Arlington, VA.
While some individuals may have sufficient assets to pay for LTC, using retirement income may not be the most efficient way to handle these costs. Indeed, any well thought out retirement plan would require consideration of the costs of the LTC contingency, including the potential drain on retirement income. As of 2007, the national average costs of LTC, according to the U.S. Department of Health and Human Services, were:
o Nursing home, semi-private room: $181 per day, or $66,065 per year.
o Nursing home, private room: $205 per day, or $74,825 per year.
o Home health aide, $25 per hour.