The Biggest Mistakes People Make When Choosing to Self-Insure for Long Term Care

photo of a words on a clipboard spelling out long-term care planning

The prospect of needing long-term care is a reality for many of us. Whether it’s due to a chronic illness, disability, or simply the natural process of aging, long-term care can be a significant financial burden. Some individuals opt to self-insure for long-term care, assuming they can cover the costs out of pocket. However, this choice can lead to serious financial and emotional consequences. Let’s explore the biggest mistakes people make when choosing to self-insure for long-term care and the benefits of buying long-term care insurance.

Mistake 1: Underestimating the Cost of Long-Term Care

One of the most common mistakes people make when choosing to self-insure is underestimating the exorbitant cost of long-term care. According to the U.S. Department of Health and Human Services, the average annual cost of a private room in a nursing home was over $100,000 in 2020. Home health care services and assisted living facilities are also expensive. Many people wrongly assume they can rely on their savings or sell assets to cover these costs. However, without proper planning, this can quickly deplete one’s life savings, leaving little for other financial goals or emergencies.

Mistake 2: Overestimating Medicaid Coverage

Medicaid is a government program designed to provide health care coverage for low-income individuals. While it does cover some long-term care expenses, it has strict income and asset limits. To qualify for Medicaid, you may need to spend down your assets significantly, making it an impractical option for those who wish to leave an inheritance or have control over their care choices. Relying solely on Medicaid for long-term care can limit your options and quality of care.

Mistake 3: Assuming Your Health Insurance Will Cover Long-Term Care

Another common misconception is that health insurance, including Medicare, will cover long-term care costs. While these plans may cover certain medical expenses, they do not provide comprehensive long-term care coverage. Medicare, for example, only covers short-term skilled nursing care under specific circumstances. It does not pay for extended stays in nursing homes, assisted living facilities, or personal care services.

Mistake 4: Ignoring the Emotional and Caregiver Burden

Self-insuring for long-term care doesn’t only have financial consequences; it can also take a toll on your loved ones. When you rely on family members or friends to provide care, it can strain relationships and place an emotional burden on them. Long-term care insurance can help alleviate some of this stress by providing professional caregivers and support services.

Benefits of Long-Term Care Insurance

Now that we’ve explored some of the common mistakes associated with self-insuring for long-term care, let’s discuss why purchasing long-term care insurance is a more sensible choice.

Financial Security

Cost Coverage: Long-term care insurance covers a significant portion of the expenses associated with extended care, including nursing homes, assisted living facilities, in-home care, and more. This financial support ensures that your savings remain intact, providing you with peace of mind.

Budgeting Ease: With long-term care insurance, you pay regular premiums, which can be budgeted into your retirement plan. This predictability allows for better financial planning and prevents the sudden and substantial financial hit that self-insuring can cause.

Inflation Protection: Some long-term care insurance policies offer inflation protection, which adjusts your coverage over time to keep pace with the rising costs of care. This ensures that your coverage remains relevant and effective, even years into the future.

Asset Protection

Preservation of Assets: Long-term care insurance helps safeguard your assets, ensuring that they can be passed on to your heirs or used for other financial goals, such as estate planning, charitable giving, or providing for your spouse.

Avoiding the Spend-Down: Medicaid, a government program that helps cover long-term care costs, often requires individuals to “spend down” their assets to qualify. Long-term care insurance can help you avoid this process, preserving your financial independence.

Choice and Control

Care Flexibility: Long-term care insurance provides you with the flexibility to choose the type of care that best suits your needs and preferences. This includes the ability to select where you receive care, whether it’s in your own home, a facility, or a combination of both.

Reduced Reliance on Family: By having long-term care insurance, you lessen the burden on your family members. They won’t be solely responsible for your care, and you can maintain a more independent lifestyle.

Care Coordination: Many long-term care insurance policies offer care coordination services. This means professionals can help you navigate the complexities of long-term care, ensuring you receive the most appropriate and effective services.

Peace of Mind

Emotional Well-Being: Knowing you have a comprehensive plan in place for your long-term care needs can alleviate the emotional stress and anxiety often associated with aging and health concerns.

Maintained Dignity: Long-term care insurance helps you maintain your dignity and quality of life by providing access to professional care, maintaining your independence, and preserving your choices.

Access to Quality Care

Professional Caregivers: Long-term care insurance typically grants access to a network of qualified and experienced caregivers. This means you’ll receive care from trained professionals who can address your specific needs.

Quality Facilities: With long-term care insurance, you can choose from a range of quality facilities and service providers, ensuring that your care meets high standards.

Looking into Your Long-Term Care Options? Our AIB Team Can Help!

Opting for self-insurance in long-term care planning may offer a sense of autonomy and control, but it also comes with significant responsibilities. Self-insuring can expose you to significant financial risks and emotional stress, potentially jeopardizing your financial well-being, leaving you with limited options for quality care. Long-term care insurance on the other hand secures your financial stability, safeguards your assets, and allows you to maintain clear control over your care choices. Talk to our team today to discuss which options are right for you!