Not only are you dealing with the question of do you need long-term insurance (LTC), but how much coverage is right for you. Here are some guidelines to help you determine your needs.
Determining the right amount of LTC for you
Assume you have $60,000 coming in from Social Security and investment income. That's about $164 a day.
Estimate hourly LTC costs in your area. For example, in Phoenix, in-home care runs about $22 an hour. If all of your income was available for care, that would provide about 7.5 hours a day of care – enough for someone to come in and help with major tasks each day.
However, not all your income is available because you still need money for living expenses in addition to your LTC costs. Plus, if you are married, your spouse may need a significant portion of that income to continue their own lifestyle.
You may decide that of the $164 you have available as income per day, only $40 of it would be available for LTC costs. That would cover less than two hours a day. For the sake of our example, assume that costs in your area run about $220 a day (about average); leaving you with a gap of $180 a day. If you decide to protect against an average stay of about 2 ½ years, then you would want to buy a policy that had a $180 per day benefit that would provide coverage for 2-4 years. You would also want an inflation rider, so if and when you needed care (likely 10-20 years after purchase of the policy) that $180 per day would have increased.
In considering LTC insurance you will have the necessary resources to afford quality care, and you will have the ability to choose how and where you receive this care. It’s important to determine what financial resources will be available to you and role LTC can play in providing you with quality care.